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02 March 2017

ISLA: FSB published reports on financial stability and regulatory approaches to asset re-hype and non-cash collateral re-use

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The FSB has published its reports on financial stability issues and regulatory approaches to asset re-hypothecation and non-cash collateral re-use alongside its report on the final metrics and measures report data collection on collateral re-use.

Throughout the reports, the FSB stresses the importance of re-hypothecation and re-use to well-functioning markets. The FSB concludes that no immediate need for harmonisation of re-hypothecation of client assets is required at a global level, despite fragmentation of regimes, as existing approaches are effective in offering client protection.

Following up from its November 2015 recommendations on SFT data collection and aggregation, the second report details the data to be collected on non-cash collateral re-use, with the FSB again emphasising the importance of monitoring re-use beyond SFTs. This will be reviewed again five years after global data collection begins in 2020.

At EU level, this will feed into the ongoing Commission EPTF work on post-trading barriers within the broader context of CMU which ISLA has been assisting with. The conclusions are also likely to feature in the Commission’s report under the SFTR due in October to assess the FSB’s workstreams on SFTs and potential follow-up at European level.

There are no immediate actions for ISLA to take in respect of the reports, but we will continue to monitor developments both from a global FSB perspective and at the European level.

Non-Cash Collateral Re-Use: Measure and Metrics

Re-hypothecation and collateral re-use: Potential financial stability issues, market evolution and regulatory approaches

© ISLA - International Securities Lending Association

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