ISLA conference: FTT could cost
20 June 2013 Prague
Image: Shutterstock
The EU Financial Transaction Tax (FTT) would make it difficult to earn a profit from securities lending and repo if it is enacted in its current form, according to panellists at the International Securities Lending Association’s (ISLA's) annual conference in Prague.
The European Commission outlined the details of the FTT in February. If it is adopted by the 11 member states that have agreed to it as drafted, the tax could be levied on equity, bond and derivatives trades as early as January 2014. It is subject to a key vote in July.
A panellist at the ISLA conference warned that it could have a damaging effect on returns and prevent securities finance participants from making a profit.
Repo markets would be the hardest hit, said the panellist, with an estimated cost of €198 billion to Europe's largest banks. The short average duration of repo transactions make them particularly susceptible to the tax, he explained.
He added that proposed exemptions to the tax, including collateralised loans, central bank funding and central counterparties, could become a focus for business.
Another panellist said the FTT "just doesn't make any sense", while a third said EU regulators need to look at alternatives to the tax, which is in effect "a tax on liquidity". He added: "I think it's wrong [to do that]."
The European Commission outlined the details of the FTT in February. If it is adopted by the 11 member states that have agreed to it as drafted, the tax could be levied on equity, bond and derivatives trades as early as January 2014. It is subject to a key vote in July.
A panellist at the ISLA conference warned that it could have a damaging effect on returns and prevent securities finance participants from making a profit.
Repo markets would be the hardest hit, said the panellist, with an estimated cost of €198 billion to Europe's largest banks. The short average duration of repo transactions make them particularly susceptible to the tax, he explained.
He added that proposed exemptions to the tax, including collateralised loans, central bank funding and central counterparties, could become a focus for business.
Another panellist said the FTT "just doesn't make any sense", while a third said EU regulators need to look at alternatives to the tax, which is in effect "a tax on liquidity". He added: "I think it's wrong [to do that]."
NO FEE, NO RISK
100% ON RETURNS If you invest in only one securities finance news source this year, make sure it is your free subscription to Securities Finance Times
100% ON RETURNS If you invest in only one securities finance news source this year, make sure it is your free subscription to Securities Finance Times
