On June 17, 2015, the Council of the European Union and the European Parliament announced that they had reached agreement on the text of the proposed Regulation on Reporting and Transparency of Securities Financing Transactions, known as SFTR. The aim of the SFTR is to improve the transparency of securities lending, repurchase transactions, reverse repurchase transactions, buy-sell back or sell-buy back transactions and margin lending transactions which will help reduce the likelihood of banks seeking to avoid rules applicable to them by moving certain of their activities to the shadow banking sector. The SFTR, once finalized, will require: (i) all securities financing transactions, subject to certain exceptions for central banks and similar bodies, to be reported to EU recognized trade repositories; (ii) investment funds to disclose their use of SFTs to investors in regular reports and pre-investment documents; and (iii) minimum conditions to be met on the reuse of collateral, such as disclosure of risks and the need to obtain prior consent. The politically agreed SFTR must be technically finalized before the official legal text can be adopted by the European Parliament, which is currently scheduled for October 2015.
The European Council’s press release is available at: http://www.consilium.europa.eu/en/press/press-releases/2015/06/17-ecofintransparency-securities-financing-transactions/ and the European Parliament’s is available at: http://www.europarl.europa.eu/pdfs/news/expert/infopress/20150617IPR67310/20150617IPR67310_en.pdf.