2015 to be year of the securities financing transaction
11 February 2015 Basel, Switzerland
Image: Shutterstock
The Financial Stability Board (FSB) will complete its regulatory overhaul of securities finance transactions this year, according to chair Mark Carney.
The Bank of England governor wrote a letter to G20 country finance ministers and central bank leaders on 4 February, outlining the FSB’s plans in 2015.
Carney promised to complete overhaul of ‘shadow banking’, including two reforms of securities financing transactions.
The FSB will “finalise the remaining elements” of its regulatory framework for haircuts on securities financing transactions and set out details for monitoring implementation.
Under its October 2014-released framework, corporate bonds with a maturity of between one and five years will require a 1.5 percent haircut.
Equities will need a 6 percent haircut. Other assets within the scope of the framework will require haircuts of 10 percent. The FSB will apply these rules to securities-against-cash transactions.
Where shares in mutual funds are used as collateral for securities financing transactions, they will be subject to the 10 percent “other asset” haircut.
Still to complete is the FSB’s work on the application of numerical haircut floors to non-bank-to-non-bank transactions. It previously said it would outline its plans by Q2 2015.
Also on the FSB’s agenda is the development of standards and processes for global securities financing data collection and aggregation. It is seeking comments on the proposed standards and processes by 12 February.
The FSB will also outline a timeline for implementation by the end of 2015, said Carney.
The Bank of England governor wrote a letter to G20 country finance ministers and central bank leaders on 4 February, outlining the FSB’s plans in 2015.
Carney promised to complete overhaul of ‘shadow banking’, including two reforms of securities financing transactions.
The FSB will “finalise the remaining elements” of its regulatory framework for haircuts on securities financing transactions and set out details for monitoring implementation.
Under its October 2014-released framework, corporate bonds with a maturity of between one and five years will require a 1.5 percent haircut.
Equities will need a 6 percent haircut. Other assets within the scope of the framework will require haircuts of 10 percent. The FSB will apply these rules to securities-against-cash transactions.
Where shares in mutual funds are used as collateral for securities financing transactions, they will be subject to the 10 percent “other asset” haircut.
Still to complete is the FSB’s work on the application of numerical haircut floors to non-bank-to-non-bank transactions. It previously said it would outline its plans by Q2 2015.
Also on the FSB’s agenda is the development of standards and processes for global securities financing data collection and aggregation. It is seeking comments on the proposed standards and processes by 12 February.
The FSB will also outline a timeline for implementation by the end of 2015, said Carney.
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