FSB addresses financial stability risks in SFTs
22 July 2019 Basel
Image: Shutterstock
The Financial Stability Board (FSB) has adjusted implementation timelines for its policy recommendations to address financial stability risks in securities financing transactions (SFTs).
The FSB developed 18 policy recommendations published in August 2013 and updated in October 2015 to address financial stability risks from SFTs.
The recommendations cover improvements to regulatory reporting and market transparency of SFTs, regulation of SFTs, and structural aspects of SFT markets.
FSB member jurisdictions are making progress in implementing these policy recommendations, however, there has been significant delays in some jurisdictions.
This is especially for the recommendations related to minimum haircuts standards for non-centrally cleared SFTs used by banks to provide financing to non-banks, the FSB explained.
The FSB highlighted that these delays stem mainly from the new date for implementing the minimum haircut standards on bank-to-non-bank SFTs into banking regulation as part of the Basel III framework, which is now January 2022.
The new adjustments have been made to those related to minimum haircut standards for non centrally cleared SFTs.
For example, the implementation timelines for the policy recommendations related to the framework of numerical haircut floors will be extended to January 2022 (instead of end-2018) for bank-to-non-bank transactions.
They will also be extended to January 2024 (instead of end-2019) for non-bank-to-non-bank transactions.
Meanwhile, the implementation timelines for other recommendations remain unchanged.
The FSB will continue to monitor implementation of its policy recommendations for SFTs so as to both address financial stability risks in the SFT markets as well as enhance the resilience of non-bank financial intermediation.
The FSB developed 18 policy recommendations published in August 2013 and updated in October 2015 to address financial stability risks from SFTs.
The recommendations cover improvements to regulatory reporting and market transparency of SFTs, regulation of SFTs, and structural aspects of SFT markets.
FSB member jurisdictions are making progress in implementing these policy recommendations, however, there has been significant delays in some jurisdictions.
This is especially for the recommendations related to minimum haircuts standards for non-centrally cleared SFTs used by banks to provide financing to non-banks, the FSB explained.
The FSB highlighted that these delays stem mainly from the new date for implementing the minimum haircut standards on bank-to-non-bank SFTs into banking regulation as part of the Basel III framework, which is now January 2022.
The new adjustments have been made to those related to minimum haircut standards for non centrally cleared SFTs.
For example, the implementation timelines for the policy recommendations related to the framework of numerical haircut floors will be extended to January 2022 (instead of end-2018) for bank-to-non-bank transactions.
They will also be extended to January 2024 (instead of end-2019) for non-bank-to-non-bank transactions.
Meanwhile, the implementation timelines for other recommendations remain unchanged.
The FSB will continue to monitor implementation of its policy recommendations for SFTs so as to both address financial stability risks in the SFT markets as well as enhance the resilience of non-bank financial intermediation.
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