FSB to Enforce SFT Haircut Rules for Buy-Side from September

The Financial Stability Board (FSB) will enforce new rules for how much margin is required on securities financing trades between asset managers, from September this year.

From September, the FSB will introduce numerical haircut floors for non-centrally cleared securities lending and repo transactions between non-bank firms.

This will mean buy-side firms globally will be limited on how much margin they can charge on securities lending trades.

The FSB is aiming to limit the possible build-up of leverage from outside of the banking system.

The FSB, which is comprised of international financial regulators and central banks, is also planning to introduce reporting of securities financing trades, in a bid to enhance transparency in the ‘shadow banking’ sector.

It plans to finalise these rules by the end of the year.

However these rules have been met with significant hostility from asset managers. BlackRock defended its practices in a whitepaper published in May, arguing that regulators have misunderstood the risks associated with securities lending.

Furthermore Amundi, Europe’s largest asset manager, earlier this year called for an exemption for asset managers from the FSB’s reporting proposal.