Have your say on the FSB’s sec lending recommendations
21 November 2012 Switzerland
Image: Shutterstock
In its continued efforts to strengthen oversight and regulation of “shadow banking,” the Financial Stability Board (FSB) is asking for feedback on its thirteen recommendations.
The recommendations span areas in which the FSB believes policies are needed to address potential systemic risks associated with “shadow banking”, including mitigating the spill-over effect between the regular banking system and the shadow banking system, reducing the susceptibility of money market funds (MMFs) to “runs”, and dampening risks and pro-cyclical incentives associated with secured financing contracts such as repos and securities lending that may exacerbate funding strains in times of “runs”.
Commenting on the push for tighter rules, Dr Pete Hahn from Cass Business School said that the “menacing” name should be revamped.
“Shadow banking should be replaced with the less ominous but more explicit term 'non-bank creditors'. Non-bank creditors that smell, feel, and sound like banks but aren’t in name are clearly the problem; while non-bank creditors that do not, and are not linked to the banking system, surely offer us a welcome reduced dependence on banks.”
Vital issues flagged up by the regulator FSB’s recommendations include:
· Authorities should collect more granular data on securities lending and repo exposures amongst large international financial institutions with high urgency
· Trade repositories (TRs) are likely to be the most effective way to collect comprehensive repo and securities lending market data.
The board is seeking comment on the documents, to be submitted by 14 January 2013 to fsb@bis.org, with final recommendations expected to be published in September 2013.
The recommendations span areas in which the FSB believes policies are needed to address potential systemic risks associated with “shadow banking”, including mitigating the spill-over effect between the regular banking system and the shadow banking system, reducing the susceptibility of money market funds (MMFs) to “runs”, and dampening risks and pro-cyclical incentives associated with secured financing contracts such as repos and securities lending that may exacerbate funding strains in times of “runs”.
Commenting on the push for tighter rules, Dr Pete Hahn from Cass Business School said that the “menacing” name should be revamped.
“Shadow banking should be replaced with the less ominous but more explicit term 'non-bank creditors'. Non-bank creditors that smell, feel, and sound like banks but aren’t in name are clearly the problem; while non-bank creditors that do not, and are not linked to the banking system, surely offer us a welcome reduced dependence on banks.”
Vital issues flagged up by the regulator FSB’s recommendations include:
· Authorities should collect more granular data on securities lending and repo exposures amongst large international financial institutions with high urgency
· Trade repositories (TRs) are likely to be the most effective way to collect comprehensive repo and securities lending market data.
The board is seeking comment on the documents, to be submitted by 14 January 2013 to fsb@bis.org, with final recommendations expected to be published in September 2013.
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