The Financial Stability Board (FSB) has published a new frequently-asked-questions (FAQ) document to supplement national implementation of its SFT Data Standards and promote a common approach to data management across the global market.
The international supervisory body has created a new educational resource as part of its focus on financing strategies which it says can also be used to take on leverage as well as maturity and liquidity mismatched exposures, and therefore can “pose risks to financial stability”.
Building on the policy recommendations to address financial stability risks in SFTs published in August 2013, the board developed the data standards and processes for collecting and aggregating global data, known as the SFT Data Standards, in November 2015.
Based on the SFT Data Standards, the FSB, through its Data Experts Group on Securities Financing Transactions, has since been working on global data collection and aggregation, through developing detailed operational arrangements such as the reporting guidelines.
The new FAQ document is the latest attempt by the FSB to promote transparency in global SFT markets by encouraging standardisation of data and transaction reporting.
The FAQs document was developed by the FSB, through its Data Experts Group on Securities Financing Transactions (SFTDEG) to help national implementation of the SFT Data Standards.
The market features addressed are based on practical issues raised by FSB member jurisdictions in their implementation of the SFT Data Standards, as well as by the Bank for International Settlements (BIS) acting as global aggregator, that may benefit from a common approach as developed by the SFTDEG, the board says.
BIS has also agreed to provide the operational support for the collection and potential dissemination of aggregated securities financing data as global aggregator.
The document includes 27 questions and responses and is available to download by all stakeholders.
It addresses a broad range of topics within the SFT market from cash reuse, to haircuts, and the correct collateral type for exchange-traded funds and real estate investment funds, among several other issues.
The document has a particular focus on addressing various issuers around collateral allocation and reporting which has been cited as an area of concern under the Securities Financing Transaction Regulation, where differing interpretations of the requirements is potentially undermining data quality.
The board says it will update the FAQs as market practices evolve.
