The FSB has published a consultation document in which it sets out certain policy recommendations for “Addressing Shadow Banking Risks in Securities Lending and Repo”. The FSB is looking for responses to its paper by 14th January and we will be setting up an initial call for members to start the process of formulating an ISLA response. As the paper has only just been published we have not yet reviewed it in detail. As expected the paper contains recommendations covering transparency, minimum haircuts, cash collateral reinvestment and rehypothecation. The paper also mentions CCPs but does not suggest that these be mandatory. Encouragingly the paper focuses on actual shadow banking risks as opposed to all securities lending activity (an approach which we have argued for). This appears to mean that the discussion around minimum haircuts is focused on financing transactions rather than vanilla securities lending.
We will produce a more thorough analysis of the paper shortly and set up a call in the next two weeks. In the meantime please feel free to share any observations or comments that you think are important.