OFR adopted a final rule to establish a data collection covering centrally cleared funding transactions in the U.S. repurchase agreement (repo) market. OFR has worked closely with FED, SEC, and others in drafting the rule. The rule will become effective from April 22, 2019. OFR also published the instructions for preparation of the report of centrally cleared transactions in the U.S. repo market. The collection is expected to begin in mid-October.
The OFR SFT-1 report is filed on a daily basis and collects data on repo transactions cleared through a covered clearing agency acting as a central counterparty (CCP) for repo transactions. The report consists of three parts: Schedule 1 collects data on outstanding general collateral trades; Schedule 2 collects data on the securities used to settle netted general collateral obligations; and Schedule 3 collects data on outstanding specific-security trades. FED will act as the collection agent of OFR, with required data to be submitted directly to the Federal Reserve Bank of New York (FRBNY). All respondents must submit their completed report using the eFeds system of FED or any successor technology identified by the FRBNY. FRBNY will also provide technical assistance to respondents on using this or any successor system.
The daily collection will enhance the ability of the Financial Stability Oversight Council to identify and monitor potential risks to U.S. financial stability by closing the data gap related to centrally cleared repo transactions. The collection will also support the calculation of certain reference rates, particularly alternatives to the U.S. dollar London Interbank Offered Rate (LIBOR). LIBOR has been used as a benchmark to set interest rates on trillions of dollars of home mortgages, private student loans, corporate loans, derivatives, and other financial products. LIBOR participation declined after LIBOR-related misconduct, creating the need by industry and regulators for an alternative. As a result of this need, FED formed the industry-led Alternative Reference Rates Committee, which selected the Secured Overnight Financing Rate (SOFR) as the preferred LIBOR alternative. Cleared repo data from the collection will be used to enhance the production of the SOFR. The data collection will help inform U.S. financial regulators and market participants about potential risks in the financial system, while helping to fill an important need for a LIBOR alternative with minimal regulatory burden.
Following a Notice of Proposed Rulemaking on July 10, 2018, OFR received a handful of substantive comments—all supporting the proposed collection and citing its benefits. The rule requires the submission of information by central counterparties with average daily total open repo commitments of at least USD 50 billion. The Fixed Income Clearing Corporation would be the only market participant required to report if the collection began today, but other firms could meet the eligibility criteria for reporting in the future.
Effective Date: April 22, 2019
Keywords: Americas, US, Banking, Securities, Repo, Central Clearing, CCP, SFT-1, Reporting, SOFR, LIBOR, Data Collection, FED, SEC, OFR
Previous ArticleIMF Assesses Australian Financial Sector Under the 2018 FSAP
EC published Regulation 2021/25 that addresses amendments related to the financial reporting consequences of replacement of the existing interest rate benchmarks with alternative reference rates.
BIS published a bulletin, or a note, that examines the cyber threat landscape in the context of the pandemic and discusses policies to reduce risks to financial stability.
HM Treasury, also known as HMT, has updated the table containing the list of the equivalence decisions that came into effect in UK at the end of the transition period of its withdrawal from EU.
EBA published an erratum for technical package on phase 1 of the reporting framework 3.0.
APRA updated a frequently asked question (FAQ), for authorized deposit-taking institutions, on the measurement of credit risk weighted assets.
EBA published the quarterly risk dashboard, along with the results of the Risk Assessment Questionnaire survey among 60 banks and 15 market analysts.
ECB concluded the public consultation on the introduction of a digital euro in EU.
ECB published a guide that sets out the supervisory approach to consolidation in the banking sector.
The SRB Chair Elke König published an article setting out work priorities for 2021.
FDIC has selected 11 technology companies—including BearingPoint, Fed Reporter, Inc, and S&P Global Market Intelligence, LLC—for inclusion in the third and final phase of the rapid prototyping competition.