ISLA conference: ESMA on securities lending
19 June 2013 Prague
Image: Shutterstock
‘Shadow banking’ was one of the worst terms that could have been coined to describe activities such as securities lending, according to Steven Maijoor of the European Securities and Markets Authority (ESMA).
Maijoor was addressing attendees of the International Securities Lending Association’s (ISLA’s) annual conference in Prague.
He gave an overview of ESMA’s objectives—to protect investors, ensure the stability of European financial markets, and create a single rulebook for the EU’s 27 member states—before focusing on securities lending and the effects of related regulation.
Of shadow banking, he said it is “one of the worst terms that could have been invented for these activities”, as most are already adequately regulated and supervised.
But concerns do remain, including the opacity of activities, interconnectedness with more mainstream sectors, the size of business—Maijoor said that shadow banking covers some 9 trillion assets—and how best to regulate it, with more transparency needed.
On transparency, Maijoor said that he spoke to ISLA representatives during the conference about the need for more securities lending data, which regulators cannot access.
He said: “[The] industry is willing to be helpful and give [regulators] a better picture of the market.”
Moving on to ESMA’s own regulatory initiatives, Maijoor said that the authority’s consolidated guidelines on exchange-traded funds and other UCITS issues and repo and reverse repo agreements were not the result of negative feeling, but a necessity.
Among the more controversial guidelines was a requirement that all fees arising from securities lending, net of costs, “should be returned to investors”.
Maijoor said that this “high-level principle” is in the interests of the market, and that any attempt to circumvent it may need to be addressed through regulation.
Maijoor was addressing attendees of the International Securities Lending Association’s (ISLA’s) annual conference in Prague.
He gave an overview of ESMA’s objectives—to protect investors, ensure the stability of European financial markets, and create a single rulebook for the EU’s 27 member states—before focusing on securities lending and the effects of related regulation.
Of shadow banking, he said it is “one of the worst terms that could have been invented for these activities”, as most are already adequately regulated and supervised.
But concerns do remain, including the opacity of activities, interconnectedness with more mainstream sectors, the size of business—Maijoor said that shadow banking covers some 9 trillion assets—and how best to regulate it, with more transparency needed.
On transparency, Maijoor said that he spoke to ISLA representatives during the conference about the need for more securities lending data, which regulators cannot access.
He said: “[The] industry is willing to be helpful and give [regulators] a better picture of the market.”
Moving on to ESMA’s own regulatory initiatives, Maijoor said that the authority’s consolidated guidelines on exchange-traded funds and other UCITS issues and repo and reverse repo agreements were not the result of negative feeling, but a necessity.
Among the more controversial guidelines was a requirement that all fees arising from securities lending, net of costs, “should be returned to investors”.
Maijoor said that this “high-level principle” is in the interests of the market, and that any attempt to circumvent it may need to be addressed through regulation.
NO FEE, NO RISK
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