The proposal for a Securities Financing Transactions Regulation (SFTR) provides a set of measures aiming to enhance regulators’ and investors’ understanding of securities financing transactions (SFTs). During the financial crisis, regulators and supervisors encountered difficulties in anticipating the emergence of risks in the area of securities financing. Both internationally and in the European Union, it was widely agreed that transparency needs to be enhanced.

Objective

SFTR is part of a globally coordinated effort initiated by the Financial Stability Board (FSB) to reduce financial stability risks from shadow banking activities.

The regulation will require companies to report their SFTs to an approved EU trade repository.

Time line

On 29 January 2014, the European Commission adopted a proposal for a regulation aimed at increasing transparency of SFTs and of reuse. A reporting obligation is expected for 2018. The European Securities and Markets Authority (ESMA) is currently working together with the national competent authorities (NCAs) and the European System of Central Banks (ESCB) on draft regulatory technical standards, which have to be submitted to the Commission by 13 January 2017.

SFTR: the highlighted parts of the value chain are affected