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
APRA is consulting on the reporting standard for credit risk management (ARS 220.0).
FCA and PRA in the UK, FED in the US, and the authorities in Singapore have fined Goldman Sachs for risk management failures in connection with the 1Malaysia Development Berhad (1MDB).
ISDA launched the IBOR Fallbacks Supplement and the IBOR Fallbacks Protocol, with both becoming effective on January 25, 2021.
BCBS announced that OSFI and the Bank of Canada hosted the 21st International Conference of Banking Supervisors (ICBS) virtually on October 19-22, 2020.
FCA proposed guidance on how firms should continue to seek to help customers who hold insurance and premium finance products and may be in financial difficulty because of COVID-19, after October 31, 2020.
EBA issued an opinion on prudential treatment of the legacy instruments as the grandfathering period nears an end on December 31, 2021.
ESRB published the fifth issue of the EU Non-bank Financial Intermediation Risk Monitor 2020 (NBFI Monitor).
HM Treasury announced that the new Financial Services Bill has been introduced in the Parliament.
APRA announced that it has increased the minimum liquidity requirement of Bendigo and Adelaide Bank for failing to comply with the prudential standard on liquidity.
Ambassadors of EU member states agreed on the mandate of European Council on the Capital Markets Recovery Package, to support economic recovery from the COVID-19 crisis.