IMN: No business effect, says European Commission 18 September 2014London Reporter: Mark Dugdale
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A directive aimed at improving transparency in securities finance will not adversely affect the business in any way, promised a policy officer of the European Commission.
Martin Mitov addressed the European Beneficial Owners’ Securities Lending Conference in London with a keynote speech that focused on the reporting of securities finance transactions.
Mitov said the European Commission’s proposal on securities finance transaction reporting, developed in response to the Financial Stability Board’s investigation into ‘shadow banking’, “is all about transparency—it doesn’t restrict the transactions themselves”.
The proposal will see market participants reporting to trade repositories “to achieve more transparent markets”. All counterparties doing business within the EU must report trades, including repo and securities lending and borrowing transactions.
Under the proposal, all UCITS and alternative investment funds must disclose more information about securities finance transactions to investors, while rules surrounding collateral rehypothecation will also change.
Counterparties will soon have to ask the permission of the giver before putting any collateral received to work. This will apply to any instruments as defined by the Markets in Financial Instruments Directive.
Mitov commented: “This proposal does not restrict market practice. It’s an important step in understanding and reducing risk.”
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