The European Parliament’s Committee on Economic and Monetary Affairs (ECON) has published the draft report prepared by rapporteur Renato Soru on the proposed Regulation on reporting and transparency of securities financing transactions.
The draft report contains suggested amendments to the proposed Regulation. It also contains an explanatory statement which makes certain comments regarding the draft legislation under the following headings:
- reporting obligation. The rapporteur believes that reporting obligations should cover all types of securities financing transactions (SFTs) currently in the market while leaving to the European Commission the power to extend the list of SFTs and of SFTs counterparties to be included in the scope of the Regulation. The rapporteur also states that given the parallels with EMIR as far as reporting requirements are concerned, lessons should be learnt and synergies drawn. Existing mechanisms under EMIR should be established to mitigate extra costs for counterparties to report their SFTs and for trade repositories to extend their services to the recording of these trades;
- transparency obligation. The rapporteur believes that using SFTs is far from a risk-free activity. Investment funds must disclose all relevant details on these activities in their applicable public report and investor documents. Credit institutions should also disclose details on their SFTs, similar to what is required of other financial institutions. Listed companies also have a clear responsibility, should they engage in SFTs, to inform their shareholders of the risks that these activities entail;
- re-use. The rapporteur states that the Regulation should aim to make the EU compliant with the Financial Stability Board Recommendations on SFTs by end of 2017. The rapporteur also states that the Regulation should set out all the principles agreed by the FSB whilst leaving out the technical details which can be specified by the European Securities and Markets Authority. For this reason the rapporteur believes that the following elements should be added to article 15 of the draft Regulation: (i) an immediate clarification of the conditions for re-use of collateral; (ii) an obligation for counterparties to use a common methodology for haircuts applicable to collateral in certain types of SFTs; and (iii) mandatory minimum haircuts on collateral in certain types of SFTs.
ECON is due to consider the draft report in March 2015. The European Parliament is scheduled to consider the draft Regulation during its 27 to 30 April 2015 plenary session.
View Draft report (dated 22 December 2014) on the proposal for a regulation of the European Parliament and of the Council on reporting and transparency of securities financing transactions, 8 January 2015