What is it about?
Recent efforts and initiatives by the Basel Committee and the Financial Stability Board also focus around the need to address risks attributed to Securities Financing Transactions - as well as shadow banking activities.
Featured Image
Why is it important?
Risks attributed to Securities Financing Transactions are considered to be of a systemic nature as highlighted in the following statement: The Financial Stability Board (FSB:2019) recognizes the vital role assumed by SFTs such as securities lending and repurchase agreements (repos), in supporting i) price discovery – as well as ii) secondary market liquidity for a wide variety of securities. However, it is also recognized that such transactions can also be used to iii) take on leverage as well as iv) maturity and liquidity mismatched exposures, and therefore can pose risks to financial stability.
Perspectives
Securities Financing Transactions and shadow banking industries are markets which have not only immense and strategic roles in view of their functions – as well as in terms of their systemic relevance and effects, but which many enterprises have used to conceal real assets values and disguise or transfer assets in the forms of Special Purpose Vehicles (SPVs). Further more, the paper also contributes to the current literature by highlighting why other possible instruments which also serve as SPVs, by virtue of their nature and potential consequences (and benefits) need to be regulated on a central basis.
Prof Marianne Ojo
Northwestern University
Read the Original
This page is a summary of: Financial Stability, New Macro Prudential Arrangements and Shadow Banking: Regulatory Arbitrage and Stringent Basel III Regulations, SSRN Electronic Journal, Social Science Electronic Publishing,
DOI: 10.2139/ssrn.1859543.
You can read the full text:
Resources
Basel Committee on Banking Supervision (BCBS), Supervisory framework for measuring and controlling large exposures
Basel Committee on Banking Supervision (BCBS), Supervisory framework for measuring and controlling large exposures (http://www.bis.org/publ/bcbs246.pdf)
FSB adjusts implementation timelines for its policy recommendations to address financial stability risks in securities financing transactions
FSB, “FSB adjusts implementation timelines for its policy recommendations to address financial stability risks in securities financing transaction” July 19 2019
FSB, “Transforming Shadow Banking into Resilient Market-based Finance : Standards and processes for global securities financing data collection and aggregation”
FSB, “Transforming Shadow Banking into Resilient Market-based Finance : Standards and processes for global securities financing data collection and aggregation” 18 November 2015
FSB, “Strengthening Oversight and Regulation of Shadow Banking Policy Framework for Addressing Shadow Banking Risks in Securities Lending and Repos
FSB, “Strengthening Oversight and Regulation of Shadow Banking Policy Framework for Addressing Shadow Banking Risks in Securities Lending and Repos 29 Aug 2013 • https://www.fsb.org/wp-content/uploads/r_130829b.pdf?page_moved=1
“Policy Recommendations for Money Market Funds”
IOSCO, “Policy Recommendations for Money Market Funds” (http://www.iosco.org/library/pubdocs/pdf/IOSCOPD392.pdf)
Contributors
The following have contributed to this page
