Securities Financing Transactions Regulation almost here
17 June 2015 Brussels
Image: Shutterstock
The EU Securities Financing Transactions Regulation (SFTR) has moved a step closer to implementation after the law’s final text was agreed.
The Council of the EU and the European Parliament—two bodies of the so-called ‘trialogue’—came to an agreement on the SFTR’s final text on 17 June in Brussels.
The council’s permanent representatives committee will confirm the agreement within the next few days, before the SFTR is passed to the European Parliament for a vote at first reading. Implementation is expected to follow later this year.
Commenting on the agreement, Jonathan Hill, who is the EU commissioner responsible for financial stability, financial services and the capital markets union, said: “Today's agreement is an important step forward in bringing transparency in securities financing markets.”
“These activities are important for the financing of the economy and the right kind of oversight will make it easier to monitor and assess the risks involved.”
Although the actual text of the SFTR has never been published, the trialogue says that it aims to improve transparency in securities finance by enabling regulators to monitor for a potential build up in systematic risks, requiring the disclosure of more information to the underlying investors whose assets are being lent, and curbing collateral rehypothecation.
Industry commentators have taken issue with a number of the SFTR’s proposed provisions, including those on collateral rehypothecation.
A typical title transfer collateral arrangement gives full ownership rights to the receiver, but under the SFTR, rehypothecation will require the express consent of the giver, which would introduce severe legal risks that could hamper markets that rely on collateralisation in Europe.
The Council of the EU and the European Parliament—two bodies of the so-called ‘trialogue’—came to an agreement on the SFTR’s final text on 17 June in Brussels.
The council’s permanent representatives committee will confirm the agreement within the next few days, before the SFTR is passed to the European Parliament for a vote at first reading. Implementation is expected to follow later this year.
Commenting on the agreement, Jonathan Hill, who is the EU commissioner responsible for financial stability, financial services and the capital markets union, said: “Today's agreement is an important step forward in bringing transparency in securities financing markets.”
“These activities are important for the financing of the economy and the right kind of oversight will make it easier to monitor and assess the risks involved.”
Although the actual text of the SFTR has never been published, the trialogue says that it aims to improve transparency in securities finance by enabling regulators to monitor for a potential build up in systematic risks, requiring the disclosure of more information to the underlying investors whose assets are being lent, and curbing collateral rehypothecation.
Industry commentators have taken issue with a number of the SFTR’s proposed provisions, including those on collateral rehypothecation.
A typical title transfer collateral arrangement gives full ownership rights to the receiver, but under the SFTR, rehypothecation will require the express consent of the giver, which would introduce severe legal risks that could hamper markets that rely on collateralisation in Europe.
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