The U.S. Office of Financial Research (OFR) has slammed a key reporting model used for collecting securities lending and repo data, as regulatory scrutiny on securities financing transaction increases.
In a new guide on the U.S. securities lending and repo markets, the OFR highlights the model used by primary dealers for the weekly reporting of securities lending transactions, Form FR 2004, is “insufficient for in-depth monitoring of the repo activity in several respects.”
It noted the model also “lacks information on haircuts, rates and counterparty exposures”, and often “double counts trades conducted by primary dealers”.
Form FR 2004 was first introduced in the early 1960s, and reports are used by the Federal Reserve Bank of New York to provide aggregated data on the overall volume of repo and securities lending activity conducted by primary dealers.
Since the financial crisis, greater attention from regulators has shifted to key securities financing markets such as repo.
The report says while standards has improved since the 2009, data on haircuts, principal amount, interest rates, counterparty, and collateral types on bilateral repo and securities lending transactions are not reported.
It concluded that “permanent data collection is needed to filly address the discussed data gaps. Success in these and other future efforts will require adoption of international data standards, extensive collaboration, and improvements in data sharing.”
The Financial Stability Board (FSB), which represents the central banks in the G20 nations, is set to enforce reporting standards for securities lending by the end of the year.
US Agency Slams Securities Lending Reporting Model
The U.S. Office of Financial Research (OFR) has slammed a key reporting model used for collecting securities lending and repo data, as regulatory scrutiny on securities financing transaction increases.