Fed needs a fuller picture of securities lending
04 December 2015 Washington DC
Image: Shutterstock
The lack of data on securities lending, bilateral repo and derivatives trading could prove “destabilising” to the market, according to Federal Reserve vice president Stanley Fischer.
Speaking at the 2015 Financial Stability Conference on 3 December, Stanley highlighted the need to continue the work done by the Federal Reserve and the Financial Stability Board (FSB) this year to bring more clarity to shadow banking and securities financing transactions (SFTs).
Stanley used the platform to announce Federal Reserve plans to avoid regulatory arbitrage in short-term financing by establishing minimum margins for securities financing transactions on a market-wide basis.
His speech aimed to highlight areas of the securities financing and shadow banking industries where further work needs to be done to gather a sophisticated picture of the market in order to apply appropriate regulatory standards.
“We gain some insights into these markets [securities financing and shadow banking] through our supervisory relationships with the largest bank holding companies, but the activates of important non-bank market participants, such as asset managers, and their interconnections across the institutions remains opaque.”
“It is also true that little research has been undertaken that distinguishes between banks and non-banks, or highlights how their interactions are driven by economic incentives.”
“Such research could guide regulator efforts to collect data and set policies to limit possible instabilities associated with interconnectedness.”
The speech came in the wake of the news that the FSB had finalised its recommendations on increasing data reporting requirements for STFs.
The FSB stated that the extra reporting requirements will serve a wide range of market participants and improve market transparency.
The confirmed standards define the data elements for repo, securities lending and margin lending that national and regional authorities will be asked to report as aggregates to the FSB.
The FSB argues a greater detail of data reporting on SFTs is needed to detect market instability.
Speaking at the 2015 Financial Stability Conference on 3 December, Stanley highlighted the need to continue the work done by the Federal Reserve and the Financial Stability Board (FSB) this year to bring more clarity to shadow banking and securities financing transactions (SFTs).
Stanley used the platform to announce Federal Reserve plans to avoid regulatory arbitrage in short-term financing by establishing minimum margins for securities financing transactions on a market-wide basis.
His speech aimed to highlight areas of the securities financing and shadow banking industries where further work needs to be done to gather a sophisticated picture of the market in order to apply appropriate regulatory standards.
“We gain some insights into these markets [securities financing and shadow banking] through our supervisory relationships with the largest bank holding companies, but the activates of important non-bank market participants, such as asset managers, and their interconnections across the institutions remains opaque.”
“It is also true that little research has been undertaken that distinguishes between banks and non-banks, or highlights how their interactions are driven by economic incentives.”
“Such research could guide regulator efforts to collect data and set policies to limit possible instabilities associated with interconnectedness.”
The speech came in the wake of the news that the FSB had finalised its recommendations on increasing data reporting requirements for STFs.
The FSB stated that the extra reporting requirements will serve a wide range of market participants and improve market transparency.
The confirmed standards define the data elements for repo, securities lending and margin lending that national and regional authorities will be asked to report as aggregates to the FSB.
The FSB argues a greater detail of data reporting on SFTs is needed to detect market instability.
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