The European Commission has published a Report on the progress made internationally to mitigate risks associated with Securities Financing Transactions and recommendations, if any, for the EU to develop its regulatory framework under the SFT Regulation. The majority of the SFTR came into effect on January 12, 2016, except for the SFT reporting obligation which is in the process of being phased-in according to counterparty type. SFTs involve the use of securities to borrow cash or other higher investment-grade securities, or vice versa. Such transactions can include repurchase transactions, securities lending and sell/buy-backs. The SFTR requires, among other things, all SFTs to be reported to EU-recognized trade repositories, including details on the composition of collateral, whether collateral is available for reuse or has been reused, the substitution of collateral and any haircuts applied. The reporting obligation will apply to financial and non-financial counterparties, subject to exceptions for central banks and similar bodies.

The European Commission's Report assesses the EU's SFTR framework and the recommendations of the Financial Stability Board aimed at enhancing transparency of SFT markets and on haircuts for non-centrally cleared SFTs. The European Commission considers that the SFTR and other EU legislation and guidelines have addressed the FSB's recommendations and that no further regulatory action is needed at this time. An assessment of whether to introduce numerical haircut floors should be undertaken once detailed data on the SFT markets is available, in addition to considering the steps taken in other jurisdictions because the introduction of any numerical haircut floors should be globally coordinated.

View the Commission's Report.