Adoption of the securities financing transactions regulation
On December 23rd 2015, Regulation (EU) 2015/2365 of the European Parliament and of the Council of November 25th 2015 on transparency of securities financing transactions and of reuse and amending Regulation (EU) No 648/2012 (the “Regulation”) was published in the Official Journal of the EU.
The Regulation aims to improve the transparency of securities lending and repurchase transactions and applies from January 12th 2016.
As described in one of our previous newsletters regarding the proposal for the Regulation, which was adopted by the European Commission in 2014, the financial crisis has highlighted the need to further regulate not only the traditional banking sector but also areas where bank-like credit intermediation known as “shadow banking” takes place, which may affect the rest of the financial sector.
The Regulation applies to counterparties to Securities Financing Transactions (“SFTs”) and counterparties engaged in reuse of financial instruments under a collateral arrangement established in the EU or (under certain conditions) in third countries, management companies of UCITS, UCITS investment companies and AIFMs.
Such entities shall report the details of SFTs that use assets belonging to the counterparty to generate financing. SFTs usually involve the lending or borrowing of securities or commodities, repurchase (repo) or reverse repurchase transactions, or buy-back/sell-back transactions.
The key requirements set out in the articles of the Regulation comprise:
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