ISLA: Do not delay preparations for SFTR, says ESMA chair
19 June 2019 Madrid
Image: Shutterstock
The 麻豆传媒 Financing Transactions Regulation (SFTR) is a reporting regime that requires important market preparations, and 鈥渋f you have not started preparations, you should not delay, now is the time to get ready鈥�, according to Steven Maijoor, chair of the European 麻豆传媒 and Markets Authority (ESMA), speaking at the International 麻豆传媒 Lending Association conference in Madrid.
In his keynote speech, Maijoor urged the industry to respond to the SFTR guidelines released by ESMA at the end of May. He said that the SFTR guidelines were published after the 鈥減ositive experience鈥� when publishing guidelines for the Markets in Financial Instruments Directive.
He also encouraged industry members to attend the open hearing held by ESMA on 15 July to discuss the SFTR guidelines. Maijoor explained the importance of the input from the industry because like previous consultations, ESMA considers adjustments in response to feedback from stakeholders.
When describing SFTR, Maijoor explained that the implementation of SFTR in the EU is 鈥渙ne of the final pieces in the post-crisis efforts by global regulatory authorities to be what used to be known as shadow banking activities into the light and transform these activities resilient market-based finance鈥�.
Maijoor noted that SFTR is also 鈥渢he most far-reaching and encompassing legislation鈥� in terms of types of SFTs and counterparties of all the global jurisdictions contributing to the Financial Stability Board鈥檚 data collection.
He said that based on ESMA鈥檚 data strategy and all the experience gathered in recent years, 鈥渞eporting frameworks such EMIR and MiFIR will mould the SFTR data around four major data building blocks, which include counterparty, loans and collateral, margin and re-use data鈥�.
When it comes to future SFTR data, Maijoor said there are 鈥渉igh expectations that this will allow authorities to gain greater insight into SFT markets鈥�.
Maijoor said: 鈥淚n addition to financial stability monitoring, central banks will be able to rely on it to inform their monetary policy decisions. Prudential supervisors will more easily oversee the risks entailed by the liquidity and maturity transformation that can result from SFTs.鈥�
鈥淩egulators will also use the reported information to calibrate future potential regulatory requirements, such as the implementation of the FSB haircut floors on non-centrally cleared SFTs.鈥�
He added: 鈥淢oreover, authorities will be able to closely assess the build-up of leverage and interconnectedness in the financial system, as well as monitor the close links between interest rate swaps and repos.
SFTR will also shed light on the reuse of securities and the reinvestment of cash collateral made by market participants and will enable authorities to better monitor the so-called collateral velocity, according to Maijoor.
He concluded: 鈥淎s I hope I have made clear, large amounts of data now sit within securities markets regulators. Unfortunately, the development of analytical capabilities has lagged, mainly due to the limited resources available at both EU and national level. This has hampered a more widespread reliance on quantitative information, which has not been exploited so far to its fullest extent.鈥�
In his keynote speech, Maijoor urged the industry to respond to the SFTR guidelines released by ESMA at the end of May. He said that the SFTR guidelines were published after the 鈥減ositive experience鈥� when publishing guidelines for the Markets in Financial Instruments Directive.
He also encouraged industry members to attend the open hearing held by ESMA on 15 July to discuss the SFTR guidelines. Maijoor explained the importance of the input from the industry because like previous consultations, ESMA considers adjustments in response to feedback from stakeholders.
When describing SFTR, Maijoor explained that the implementation of SFTR in the EU is 鈥渙ne of the final pieces in the post-crisis efforts by global regulatory authorities to be what used to be known as shadow banking activities into the light and transform these activities resilient market-based finance鈥�.
Maijoor noted that SFTR is also 鈥渢he most far-reaching and encompassing legislation鈥� in terms of types of SFTs and counterparties of all the global jurisdictions contributing to the Financial Stability Board鈥檚 data collection.
He said that based on ESMA鈥檚 data strategy and all the experience gathered in recent years, 鈥渞eporting frameworks such EMIR and MiFIR will mould the SFTR data around four major data building blocks, which include counterparty, loans and collateral, margin and re-use data鈥�.
When it comes to future SFTR data, Maijoor said there are 鈥渉igh expectations that this will allow authorities to gain greater insight into SFT markets鈥�.
Maijoor said: 鈥淚n addition to financial stability monitoring, central banks will be able to rely on it to inform their monetary policy decisions. Prudential supervisors will more easily oversee the risks entailed by the liquidity and maturity transformation that can result from SFTs.鈥�
鈥淩egulators will also use the reported information to calibrate future potential regulatory requirements, such as the implementation of the FSB haircut floors on non-centrally cleared SFTs.鈥�
He added: 鈥淢oreover, authorities will be able to closely assess the build-up of leverage and interconnectedness in the financial system, as well as monitor the close links between interest rate swaps and repos.
SFTR will also shed light on the reuse of securities and the reinvestment of cash collateral made by market participants and will enable authorities to better monitor the so-called collateral velocity, according to Maijoor.
He concluded: 鈥淎s I hope I have made clear, large amounts of data now sit within securities markets regulators. Unfortunately, the development of analytical capabilities has lagged, mainly due to the limited resources available at both EU and national level. This has hampered a more widespread reliance on quantitative information, which has not been exploited so far to its fullest extent.鈥�
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