July 19, 2019

FSB announced adjustments to the implementation timelines for its recommendations on securities financing transactions (SFTs), specifically those related to the minimum haircut standards for non-centrally cleared SFTs. The implementation timelines for the policy recommendations for the framework of numerical haircut floors will be extended to January 2022 (instead of end of 2018) for bank-to-non-bank transactions and to January 2024 (instead of end of 2019) for non-bank-to-non-bank transactions. The implementation timelines for other recommendations remain unchanged.

As part of the work to enhance the resilience of non-bank financial intermediation, FSB had developed 18 policy recommendations to address financial stability risks that arise from SFTs such as repos and securities lending. These recommendations were published in the August 2013 report titled "Policy Framework for Addressing Shadow Banking Risks in Securities Lending and Repos" and updated in the November 2015 report titled "Regulatory framework for haircuts on non-centrally cleared securities financing transactions." Although FSB member jurisdictions are making progress in implementing these policy recommendations, the implementation has seen significant delays in some jurisdictions, especially for the recommendations on the minimum haircuts standards for non-centrally cleared SFTs used by banks to provide financing to non-banks. These delays mainly stem from the new date for implementing the minimum haircut standards on bank-to-non-bank SFTs into banking regulation as part of the Basel III framework, which is now January 2022. FSB has, therefore, decided to adjust these implementation timelines for its policy recommendations. FSB will continue to monitor implementation of its policy recommendations for SFTs to address financial stability risks in the SFT markets and to enhance the resilience of non-bank financial intermediation.

 

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Keywords: International, Banking, Securities, Securities Financing Transactions, Haircuts, Shadow Banking, Basel III, Financial Stability, FSB, Implementation Timeline, Policy Recommendations, Market Based Finance, FSB

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