Haircut proposal to come up in November
22 August 2014 Basel
Image: Shutterstock
The G20 countries will use a meeting between leaders in November to finalise rules on ‘shadow banking’, according to reports.
Repo, securities lending and money market funds have all been described as shadow banking activities, and G20 countries have discussed applying a minimum haircut to securities financing transactions between banks and non-banks globally.
The Financial Stability Board (FSB) proposals over the introduction of a minimum haircut framework for certain securities financing transactions are intended to limit the extent to which financial entities, including non-banks, can use them to obtain leverage.
The FSB and G20 countries hope that a minimum haircut would help to counteract pro-cyclical fluctuations in securities financing, but trade associations and groups have warned that the recommendations on minimum haircut methodology standards and numerical haircut floors could have unintended consequences.
Repo, securities lending and money market funds have all been described as shadow banking activities, and G20 countries have discussed applying a minimum haircut to securities financing transactions between banks and non-banks globally.
The Financial Stability Board (FSB) proposals over the introduction of a minimum haircut framework for certain securities financing transactions are intended to limit the extent to which financial entities, including non-banks, can use them to obtain leverage.
The FSB and G20 countries hope that a minimum haircut would help to counteract pro-cyclical fluctuations in securities financing, but trade associations and groups have warned that the recommendations on minimum haircut methodology standards and numerical haircut floors could have unintended consequences.
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