On 7 March 2025, the European Central Bank (ECB) issued its staff response to the European Commission’s (Commission) call for evidence on a targeted amendment to the prudential treatment of securities financing transactions (SFTs) under the net stable funding ratio (NSFR).

The Commission’s initiative aims to make permanent the current transitory prudential treatment of SFTs and unsecured transactions with a residual maturity of less than six months, undertaken with financial customers, for the purposes of the NSFR.

The response notes that with respect to short-term SFTs backed by collateral in the form of Level 1 assets, including EU sovereign bonds, ECB staff have considered the impact of the targeted amendment proposed by the Commission on SFT market functioning and financial stability. On balance, in view of concerns about market functioning and the associated implications for the implementation of monetary policy, ECB staff support extending the current treatment of short-term SFTs backed by Level 1 collateral, for example by five years, as a temporary measure, which should be subject to a review clause.