The Financial Stability Board (FSB) is publishing today for public consultation its report Standards and Processes for Global Securities Financing Data Collection and Aggregation. The proposed standards and processes are based on the policy recommendations in the FSB report Policy Framework for Addressing Shadow Banking Risks in Securities Lending and Repos that was published in August 2013. The FSB recommended national/regional authorities to collect appropriate data on securities financing markets to detect financial stability risks and develop policy responses, and to provide the total national/regional data for these markets to the FSB for aggregation in order to assess global trends in financial stability.
Securities financing transactions such as securities lending and repurchase agreements (repos) play crucial roles in supporting price discovery and secondary market liquidity for a variety of securities. They are central to financial intermediaries’ market-making activities as well as to their various investment and risk management strategies. However, such transactions can also be used by market participants to take on leverage and engage in liquidity and maturity transformation. An enhanced data collection on securities financing markets is needed for authorities to obtain more timely and comprehensive visibility into trends and developments in these markets.
The proposed standards and processes in the consultative document define the data elements for repos, securities lending and margin lending that national/regional authorities will be asked to report as aggregates to the FSB for financial stability purposes. The document also describes data architecture issues related to the data collection and transmission from the reporting entity to the national/regional authority and then from the national/regional to the global level. To ensure the consistency among national/regional data collections, the quality of global aggregates and the efficiency of the reporting framework, six recommendations to national/regional authorities are proposed. Furthermore, the potential uses of the aggregated data are discussed and the next steps for the completion of the initiative are outlined.
The FSB will complete its work on developing standards and processes by the end of 2015, based on the public consultation findings and further discussion with market participants. By then, the FSB will also develop an implementation timeline for the global data collection and aggregation. After that, the publication of relevant aggregates on the global securities financing markets to improve market transparency will be considered.
In developing the proposed standards and processes, the FSB worked closely with market participants and wishes to thank those who have taken the time and effort to share their views.
Mark Carney, Chairman of the FSB, stated that "the proposed standards are an important step to ensure that authorities fully understand trends and risks in one of the core funding markets for wide range of market participants. The global data collection and aggregation based on the FSB standards and processes will help transform securities financing markets into more transparent and resilient sources of financing that would better serve the needs of the economy”.
Daniel Tarullo, Chairman of the FSB Standing Committee on Supervisory and Regulatory Cooperation, stated that "timely, comprehensive and consistent data collection is essential for authorities in identifying the build-up of leverage and other financial stability risks in global securities financing markets. The implementation of the proposed standards and processes will allow authorities to establish a monitoring framework to support their efforts to effectively address financial stability risks stemming from securities financing".
Comments on the Consultative Document
The FSB welcomes comments on the proposed standards and processes for global securities financing data collection and aggregation. Comments and responses to the questions should be submitted by 12 February 2015 by email to fsb@bis.org or by post (Secretariat of the Financial Stability Board, c/o Bank for International Settlements, CH-4002, Basel, Switzerland). Responses will be published on the FSB website unless confidential treatment is specifically requested.