In October 2014, the Financial Stability Board published a report on Strengthening Oversight and Regulation of Shadow Banking – Regulatory framework for haircuts on non-centrally cleared securities financing transactions which specified the regulatory framework for haircuts on non-centrally cleared securities financing transactions (SFTs), and introduced a framework for haircut floors for non-centrally cleared SFTs.
As part of this framework the FSB recommended that the Basel Committee on Banking Supervision (BCBS) incorporate the haircut floors into the capital requirements for non-centrally cleared SFTs by setting significantly higher capital requirements for transactions with haircuts traded below the haircut floors.
The BCBS has now published a consultative document on haircut floors for non-centrally cleared SFTs. The objective of the proposal in the consultative document is to create incentives for banks to set their collateral haircuts above the floors rather than hold more capital.
The deadline for comments on the consultative document is 5 January 2016.