The European Commission (EC) published their review of the securities finance market on 19th October 2017. This includes a report of the progress in international efforts to mitigate the risks associated with securities finance transactions (SFTs) and an assessment of the European SFT market. This report is required under SFTR and is used to report back to the FSB on the Commission’s progress in implementing the FSBs requirements around the SFT market. We give a summary here.
Securities financing transactions (SFTs) can contribute to leverage in the financial system. One of the main issues related to leverage is procyclicality, which can manifest itself in many different ways and can incorporate risks for financial stability.