ESMA chair rubbishes collateral shortage fears
27 June 2016 Vienna
Image: Shutterstock
Concerns of a collateral shortage in the wake of the implementation of the European Market Infrastructure Regulations (EMIR) were dismissed as unfounded by the Steven Maijoor, chair of the European Securities Markets Authority (ESMA), in a keynote speech at ISLA’s annual conference.
“Within ESMA’s remit, EMIR contributed to a huge increase in the demand for collateral. Despite this, predictions of a major shortage of collateral in the system do not seem to have materialised, although ESMA continues to closely monitor market developments,” Maijoor stated.
Moving on to discuss the European Central Bank’s recent quantitative easing policy, delegates at ISLA’s Annual Securities Finance and Collateral Management Conference in Vienna heard that “it is also very challenging to assess the net effects of bond purchases by central banks on collateral availability due to the multiple transmission channels”.
Maijoor, speaking on 23 June, added that, according to ESMA’s own research, the policy had led to a spike in the price of high-quality government bond collateral in the repo market, but that the premium was offset by the bank’s securities lending programme.
When discussing ongoing regulatory reporting issues that had been raised earlier in the conference, Maijoor said that ESMA is keeping EMIR reporting standards in mind while crafting the Securities Financing Reporting Regulation.
Maijoor confirmed that “to the extent feasible, ESMA is working on ensuring the standardisation of rules and requirements under these three reporting regimes. In this respect, ESMA has proposed the use of the ISO 20022 standard for SFT reporting.”
“To be clear, this doesn’t mean that all the data fields reported under SFTR, EMIR and MiFID would be exactly the same, which would put into question why three reporting regimes were envisaged in the first place. But where the same type of information is required, it should be as standardised as possible,” he added.
EMSA’s chair concluded by reiterating that ESMA intends to build on existing relationships with ISLA and other trade associations to ensure industry feedback is correctly understood and incorporated into its final policy recommendations.
“Within ESMA’s remit, EMIR contributed to a huge increase in the demand for collateral. Despite this, predictions of a major shortage of collateral in the system do not seem to have materialised, although ESMA continues to closely monitor market developments,” Maijoor stated.
Moving on to discuss the European Central Bank’s recent quantitative easing policy, delegates at ISLA’s Annual Securities Finance and Collateral Management Conference in Vienna heard that “it is also very challenging to assess the net effects of bond purchases by central banks on collateral availability due to the multiple transmission channels”.
Maijoor, speaking on 23 June, added that, according to ESMA’s own research, the policy had led to a spike in the price of high-quality government bond collateral in the repo market, but that the premium was offset by the bank’s securities lending programme.
When discussing ongoing regulatory reporting issues that had been raised earlier in the conference, Maijoor said that ESMA is keeping EMIR reporting standards in mind while crafting the Securities Financing Reporting Regulation.
Maijoor confirmed that “to the extent feasible, ESMA is working on ensuring the standardisation of rules and requirements under these three reporting regimes. In this respect, ESMA has proposed the use of the ISO 20022 standard for SFT reporting.”
“To be clear, this doesn’t mean that all the data fields reported under SFTR, EMIR and MiFID would be exactly the same, which would put into question why three reporting regimes were envisaged in the first place. But where the same type of information is required, it should be as standardised as possible,” he added.
EMSA’s chair concluded by reiterating that ESMA intends to build on existing relationships with ISLA and other trade associations to ensure industry feedback is correctly understood and incorporated into its final policy recommendations.
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