On October 14, 2014, the Financial Stability Board (“FSB”) issued a regulatory framework for haircuts on non-centrally cleared securities financing transactions. The aim of the framework is to limit risks building up in the shadow banking arena. The framework consists of qualitative standards to be integrated into regulatory standards for methodologies used by market participants providing securities financing to calculate haircuts on the collateral received. It also sets out a framework of numerical haircut floors applying to non-centrally cleared securities financing transactions where financing against collateral other than government securities is provided to non-banks. The framework document includes proposals (see Annex 4) setting out approaches for applying the framework of numerical haircut floors to non-bank to non-bank transactions backed by collateral other than government securities.
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