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    FSB Updates Guidance on Implementation of Framework Related to SFTs

    November 26, 2019

    FSB updated the report on regulatory framework for haircuts on certain non-centrally cleared securities financing transactions (SFTs). The report, which was initially published in November 2015, includes numerical haircut floors to apply to non-bank-to-non-bank SFTs that were finalized after taking into account responses to a public consultation in October 2014. The key update includes changes to the technical guidance on implementation of the FSB framework for haircuts on non-centrally cleared SFTs (Annex 2). The technical guidance covers frequently asked questions on implementation of the framework for haircuts on non-centrally cleared SFTs. The framework aims to address financial stability risks associated with SFTs.

    The document on regulatory framework for haircuts on certain non-centrally cleared SFTs consists of recommendations on:

    • Qualitative standards for methodologies used by market participants that provide securities financing to calculate haircuts on the collateral received
    • A framework of numerical haircut floors that will apply to non-centrally cleared SFTs in which financing against collateral other than government securities is provided to non-banks. 

    This document also includes details of an enhanced monitoring of implementation of the framework through FSB process. Annex 3 to the report provides timeline of initial implementation of the FSB framework for numerical haircut floors, based on the jurisdictional approach.

     

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    Keywords: International, Banking, Securities, Securities Financing Transactions, Haircuts, Shadow Banking, Market Based Finance, FAQ, Basel III, Non-Bank Financial Intermediation, FSB

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