ERCC publishes a Briefing Note on EU NSFR and short-term reverse repos
7 May 2024 - The ERCC has published a Briefing Note highlighting concerns related to the re-calibration of the NSFR RSF factors for short-term securities financing transactions that is due to be applied in the EU in June 2025. The note attempts to quantify the impacts for EU banks, both in terms of the aggregate annual cost to support reverse repo activity as well as the proportion of fixed income market-making that would be affected. It also points to other jurisdictions that are not implementing a similar re-calibration, thereby putting EU banks at a competitive disadvantage.
EBA updates Q&A relating to the treatment of open reverse repos under LCR
3 May 2024 - The EBA has updated the Q&A relating to the LCR treatment of open maturity reverse repos which can be terminated at any point in time. The revised Q&A provides conditions whereby open reverse repos which can be called under 30 days can be recognised as an inflow for the purposes of LCR.
ERCC responds to AMI-SeCo survey on remaining post-trade barriers in Europe
31 January 2024 - The ERCC has submitted a response to an ECB survey on remaining post-trade-barriers in Europe which was launched among members of the ECB’s Advisory Group for Market Infrastructures for Securities and Collateral (AMI-SeCO). The ERCC is represented on the AMI-SeCo through ERCC Ops co-chair Nicholas Hamilton (JP Morgan). Overall, ICMA and the ERCC welcome the renewed focus on post-trade barriers which picks up many years of discussion initiated in the early 2000s by the Giovannini reports. As the ERCC response discusses, despite some good progress over the past years, there continue to be important obstacles in place to a more integrated and efficient post-trade environment in the EU which should be tackled as a priority.
ERCC writes to the EBA regarding the treatment of open reverse repos under LCR
28 September 2023 - the ERCC has written to the EBA regarding a Q&A published by the EBA in October 2022 on the LCR treatment of open maturity reverse repos which can be terminated at any point in time. This follows a letter that the ERCC sent to the ECB and EBA in January 2022 which anticipated the possibility of an EBA interpretation that open reverse repos could no longer be counted as inflows for the purposes of the LCR calculation. The latest letter follows discussions between the ERCC Prudential Working Group and the EBA and highlights the contractual construct underpinning open-reverse repos that is consistent with a short-dated reverse repo, as well as the divergence of the EBA’s interpretation and treatment from that of other major jurisdictions. The letter points to the most significant outcome of the Q&A being increased operational risk and cost, as well as certain SFT activity moving outside of the EU.
ERCC position paper on the prudential treatment of SFT counterparty risk under CRR3
29 July 2022 - The ERCC has shared a position paper with a number of key co-legislators discussing the CRR3 file, on the potential impact of the proposed risk weighted asset (RWA) calibration for counterparty credit risk for SFTs in the Standardised Approach (SA). The current proposed calibration will result in a relatively high capital valuation adjustment (KVA) for SFTs in banks internal models as a result of the application of the Output Floor. This would make transacting SFTs with non-rated entities, such as pension funds and insurance funds, more expensive, which could also impact liquidity. The ERCC is recommending the introduction of a maturity adjustment under the SA-CR for short term SFTs.
ERCC writes to the ECB and EBA about open-SFTs and the LCR calculation
7 January 2022 – the ERCC wrote to the ECB and EBA drawing their attention to an important netting treatment applied by banks under the Liquidity Coverage Ratio (LCR). It has been brought to the attention of the ERCC that there have been discussions within the ECB’s Capital Markets and Treasury Experts Group (CME) as to whether open-SFTs could be considered as “contingent inflows” or “outflows” from the perspective of the LCR calculation, rather than as overnight or very short-dated SFTs, with possible implications for the ability of supervised banks to net inflows/outflows. This would likely result in a number of unintended consequences and behavioural impacts, which are outlined in the letter. The ERCC has expressed its keenness to engage with the ECB CME and EBA in any discussions related to the potential treatment of open-SFTs under LCR.
ERCC submits Q&A to EBA on LCR calculation and triparty
5 January 2022 ICMA submitted a formal Q&A to the European Banking Authority related to the calculation of the Liquidity Coverage Ratio (LCR) and triparty repo.
Basel FAQ 27-d406 (now Basel CF LCR40.79) Paragraph 146 states that there is an inflow rate of 0% when collateral received through a secured lending transaction is reused to cover a short position, including matched repo books where the collateral reuse transaction has a longer maturity than the secured lending transaction. The ERCC has proposed that the EBA clarify that where the collateral given in a reverse repo with a residual maturity of up to 30 days is being funded in a repo with a residual maturity of more than 30 days, and where the collateral is allocated on an automated basis and managed by a third-party agent, the bank can report an inflow in respect of the reverse repo for the purpose of LCR, so long as the repo has automatic rights of substitution for collateral of the same or better HQLA classification.
ICMA letter in support of ISLA response to European Commission targeted consultation on the review of the Financial Collateral Directive
7 May 2021 - ICMA has submitted a letter regarding the European Commission’s targeted consultation on the review of the Financial Collateral Directive (FCD) and in support of the International Securities Lending Association (ISLA) response to the same.
ISLA and ICMA respond to BCBS Consultation on the technical amendments for minimum haircut floors on SFTs
31 March 2021 – ISLA and ICMA submitted a response to the Basel Committee on Banking Supervision’s Consultation on the technical amendments for minimum haircut floors on Securities Financing Transactions. While the associations welcome the proposed technical amendments are welcomed by the memberships, in particular for borrowers (the counterparty paying the haircut on the collateral posted), they request that all transactions where the bank is paying a haircut on the collateral posted to the securities lender are deemed out of scope of the minimum haircut floors, in accordance with CRE564, and provided for in a separate amendment.
ICMA ERCC and ICMA L&DC respond to EBA consultation on contractual recognition of stay powers under BRRD
14 August 2020 - The ICMA European Repo and Collateral Council and the ICMA Legal & Documentation Committee submitted a response to the EBA’s consultation paper on draft RTS on the contractual recognition of stay powers under Article 71a(5) of Directive 2014/59/EU (BRRD) expressing concerns with certain elements of EBA’s proposed RTS and urging EBA to consider further alignment with the FSB’s Principles for Cross Border Effectiveness of Resolution Actions.
ICMA ERCC responds to ESMA’s consultation on its First Report on Central Clearing Solutions for Pension Scheme Arrangements
15 June 2020 - ICMA’s ERCC has submitted its response to the ESMA consultation on its First Report on Central Clearing Solutions for Pension Scheme Arrangements. The ERCC has limited its response to the Questions related to Section 6.3 of the report: The market-based repo solution.
ICMA ERCC responds to European Commission’s public consultation on Implementing the Final Basel III Reforms in the EU
2 January 2020 - The ERCC’s response focuses on the questions in Section 2 which relate specifically to Securities Financing Transactions (SFTs). In particular, the ERCC addresses a number of issues related to the Basel provisions for minimum haircut floors for SFTs, drawing on the work previously undertaken for the 2018 GFMA/ICMA repo market report on the potential impacts for securities lending. The response also covers the treatment of counterparty credit risk for unrated entities and the lack of maturity adjustments in the corporate exposure provisions for the standardised approach.
To view this ERCC response, click here.
ICMA ERCC responds to ESMA’s consultation on SFTR Reporting Guidelines
30 July 2019 – The ICMA ERCC has submitted a detailed response to ESMA’s consultation on draft Guidelines in relation to SFTR Reporting under articles 4 and 12. The response was prepared based on feedback from the ERCC’s SFTR Task Force, which brings together more than 600 individuals from over 100 member firms, including sell-side, buy-side, market infrastructures and service providers, leading the industry’s implementation effort in relation to repo. The response form itself was submitted alongside two further documents prepared by the Task Force over the past months, a list of SFTR sample reports, as well as detailed overview table on the reporting of repo lifecycle events.
- ICMA ERCC consultation response: official ESMA format or ERCC response grid format
- SFTR sample reports
- Overview of Repo lifecycle events
ICMA ERCC letter to FSB and BIS on BCBS minimum haircuts
On 2 July 2019 the European Repo and Collateral Committee (ERCC) wrote to the Financial Stability Board (FSB) and Bank of International Settlements (BIS) in response to questions raised at an earlier meeting with an ERCC/GFMA delegation in Basel. The letter addresses the potential unintended consequences for securities lending as a result of the BCBS framework for minimum haircut floors as well as the possibility of using pledge collateral structures to address the issue of re-use.
View the letter
ICMA ERCC memorandum outlining recommendations for repo market best practice to address the transition from EONIA to €STR
On 2 July 2019 the European Repo and Collateral Committee (ERCC) published a memorandum outlining recommendations for repo market best practice to address the transition from EONIA to €STR.
View the memorandum [updated on 27 September 2019]
View the article from the ICMA Quarterly Report, third quarter 2019.
BCBS - on revisions to the Basel III leverage ratio framework
On 13 December 2018, the Basel Committee on Banking Supervision (BCBS) published for public comment a consultative document on “leverage ratio disclosure”. The purpose of this is to obtain feedback from market participants and stakeholders on proposed revisions to leverage ratio Pillar 3 disclosure requirements to include disclosures of the leverage ratio exposure measure amounts of SFTs, derivatives replacement cost and central bank reserves calculated using daily averages over the reporting quarter.
The ERCC response concerning this BCBS consultation can be found here.
ICMA ERCC letter – T2S pricing review
On 4 May 2018, the ICMA ERCC submitted a letter to the ECB in the context of the review of the T2S pricing schedule. The letter provides feedback on the initial proposals put forward by the Eurosystem, raising some concerns with the timing of the proposed fee increase and calling for further work to improve the T2S value proposal. The updated pricing proposals have subsequently been discussed and approved by AMI-SeCo on 17 May and were adopted by the ECB’s Governing Council on 21 June. Acknowledging the feedback received from stakeholders, AMI-SeCo members have launched follow-up work to better understand T2S flows and recommend next steps to address some of the concerns.
This ICMA ERCC letter can be found here.
Commission Exploratory Consultation on the Finalisation of Basel III
On 12 April 2018, the ICMA ERCC submitted its formal response to the Commission’s Targeted Exploratory Consultation on the Finalisation of Basel III. The ICMA ERCC’s response flags the importance of European repo and collateral markets and evidences the stresses they are facing; and accordingly then highlights that great care should be taken to fully assess the way in which further measures, particularly regarding haircuts, are calibrated.
To view this ERCC response, click here.
ESMA Consultation on Anti-Procyclicality Margin Measures for CCPs
On 28 February 2018, the ICMA ERCC submitted its formal response to the ESMA Consultation on Draft Guidelines on Anti-Procyclicality Margin Measures for CCPs. The ICMA ERCC’s response flags the importance of European repo and collateral markets in the context of CCP clearing; and highlights that great care should be taken to fully assess the way in which such anti-procyclicality measures are calibrated.
To view this ERCC response, click here.
ICMA ERCC letter - Applicability of MiFID best execution to SFTs
The ICMA ERCC has prepared a letter seeking urgent clarification regarding the applicability of MiFID best execution to SFTs. This letter is supported by a discussion paper and a presentation, which outline the practicalities (and impracticalities) of trying to apply MiFID RTS 27 and RTS 28 to SFTs.
This ICMA ERCC letter and the supporting papers can be found here.
SFT Reporting Requirements
On 31 October 2016, the ICMA ERCC submitted a letter to the European Commission seeking to resolve two points relating to SFT reporting requirements. These points concern transaction reporting of a specific subset of SFTs under MiFIR and the application of MiFID best execution reporting requirements in the case of repos
To view this ICMA ERCC letter, click here.
ESMA Call for Evidence on Asset Segregation and Custody Services
On 23 September 2016, the ICMA ERCC submitted its formal response to the ESMA Call for Evidence on Asset Segregation and Custody Services. The ICMA ERCC’s response flags the importance of repo and collateral markets; and highlights that these already face significant stress which is bearing on the liquidity of the market. It then observes that there is a risk to make this worse with the asset segregation requirements and expresses full support for ISLA’s more detailed response to this Call for Evidence.
To view this ERCC response, click here.
BCBS - on revisions to the Basel III leverage ratio framework
On 6 April 2016, the Basel Committee on Banking Supervision (BCBS) published for public comment a consultative document on “revisions to the Basel III leverage ratio framework”. The purpose of this is to obtain feedback from market participants and stakeholders on proposed revisions to the design and calibration of the Basel III leverage ratio framework.
The ERCC response concerning this BCBS consultation can be found here.
Commission - on further considerations for the implementation of the NSFR in the EU
On 26 May 2016, the European Commission published for public comment a targeted consultation on further considerations for the “implementation of the Net Stable Funding Ratio (NSFR) in the EU”. The purpose of this is to gather the views of selected stakeholders on specific issues that could be raised by the implementation of the NSFR at EU level.
The ERCC response concerning this Commission consultation can be found here.
ICMA ERCC paper - Impacts of the Net Stable Funding Ratio on Repo and Collateral Markets
The ICMA ERCC has prepared a paper on the impacts of the NSFR on repo and collateral markets. This paper identifies the risk that implementation of the NSFR will weaken the effectiveness of the repo market; and, given their interwoven relationship, the collateral market; and identifies that there are a number of ways in which the NSFR’s details could be calibrated in order to better smooth its effects on repo and collateral markets.
This ICMA ERCC paper can be found here.
FSB Consultative Document - on Collateral Re-use Measures
On 23 February 2016, the Financial Stability Board (FSB) published its consultative proposals on Possible Measures of Non-Cash Collateral Re-use.
The ERCC’s response to these proposals on collateral re-use measures can be found here.
Bank of England consultation - A new sterling money market data collection and the reform of SONIA
On 30 July 2015 the Bank of England published a consultative document setting out the details of a new sterling money market data collection and a proposed reform of the Sterling Overnight Index Average (SONIA) benchmark interest rate. The ICMA ERC Operations Group submitted a response to the consultation on 1st October, focusing on the proposals in relation to the collection of data on securities financing transactions.
To view the response, click here.
ESMA CSDR Regulation Level 2 Consultation Papers
On 19 February 2015, ICMA submitted its formal response to the ESMA Consultation Papers on Technical Standards and Technical Advice under the CSD Regulation. ICMA’s response focuses primarily on Settlement Discipline, which will have the most direct impact on the functioning and efficiency of the European capital markets. Of particular concern to ICMA’s members is the provision for Mandatory Buy-ins. In responding to the various questions, ICMA provides a number of recommendations to support the successful implementation of Settlement Discipline measures, as well as suggested enhancements to the draft technical standards.
To view the response, click here.
FSB Consultative Document - on Data Collection and Aggregation
On 13 November 2014 the Financial Stability Board (FSB) published its consultative proposals on Standards and Processes for Global Securities Financing Data Collection and Aggregation.
The ERC’s response to these proposals on data collection and aggregation can be found here.
ICMA ERC and SMPC co-sign with AFME a letter to ESMA outlining potential models for a settlement discipline regime (‘cash penalties for fails’) under CSDR
On 26 November 2014, the ICMA ERC and SMPC co-signed with AFME a letter to ESMA outlining potential models for a settlement discipline regime (‘cash penalties for fails’) under CSDR.
To view the letter, click here.
ESMA Discussion Paper on Draft Technical Standards for the Regulation on improving securities settlement in the European Union and on central securities depositories (CSD)
This discussion paper seeks stakeholders’ views on the possible contents of most of the regulatory and implementing technical standards ESMA is required to draft under the CSDR. The input from stakeholders will help ESMA in the development of the relevant technical standards to be drafted and submitted to the EC for endorsement in the form of Commission Regulations, i.e. a legally binding instrument directly applicable in all Member States of the EU.
The ERC response can be found here.
ESMA Consultation – on major shareholding notifications and indicative list of financial instruments
On 21 March 2014 the European Securities and Markets Authority (ESMA) published its “Consultation Paper on Draft Regulatory Technical Standards on major shareholdings and indicative list of financial instruments subject to notification requirements under the revised Transparency Directive”. While the main focus of the consultation is on the proposed draft Regulatory Technical Standards (RTSs)on major shareholding notifications, ESMA also sought input on the proposed content of an indicative list of financial instruments referenced to shares and with economic effect similar to holding shares and entitlements to acquire shares. ESMA is required to submit the draft RTSs to the European Commission by 27 November 2014.
The ERC response concerning repo oriented aspects of this ESMA consultation paper can be found here.
BCBS Consultative Document - on the Net Stable Funding Ratio
ICMA is a co-signatory to a joint-associations' response to the BCBS's Consultative Document on the Net Stable Funding Ratio.
The ERC's response can be accessed here.
FSB Consultative Document - on Haircuts
On 29 August 2013 the Financial Stability Board (FSB) published its consultative proposals on haircuts, alongside its “Policy Framework for Addressing Shadow Banking Risks in Securities Lending and Repos”. The FSB will publish its final recommendations on haircuts in 2014.
The ERC’s response to these proposals on haircuts, prepared jointly with ISLA, can be found here.
ICMA ERC white paper - Enhancing the transparency of the European repo market
On 16 October 2013, the ICMA ERC published a white paper on transparency of the European repo market. The paper summarises the current work of the ICMA ERC in this regard and sets out its thinking concerning the appropriate way in which to further enhance transparency in respect of the European repo market. The paper was initially published as an Appendix to the ERC response to the FSB’s August 2013 consultation on haircuts.
FSB – shadow banking WS5 re securities lending & repos
The ISLA and the ERC have sent a joint letter to the FSB to offer their assistance regarding Workstream 5’s on-going work. A copy of this letter can be found here.
BCBS - on Revised Basel III Leverage Ratio
On 26 June 2013, the BCBS published for public comment a consultative document on “Revised Basel III leverage ratio framework and disclosure requirements”. This consultative document seeks comments on a specific formulation for calculating the leverage ratio by banks subject to the Basel III framework, as well as a set of public disclosure requirements.
The ERC response concerning repo related aspects of this BCBS consultation can be found here.
CPSS/IOSCO - on Authorities’ access to trade repository data
On 11 April 2013, the CPSS and IOSCO published for public comment a joint consultative report on “Authorities' access to trade repository data”. The purpose of this joint consultative report is to provide guidance to TRs and authorities on the principles that should guide authorities' access to data held in TRs for typical and non-typical data requests.
The ERC response concerning one specific aspect of this CPSS/IOSCO consultation can be found here.
ICMA response to the European Commission consultation on a possible recovery and resolution framework for financial institutions other than banks
On 21 December 2012 ICMA submitted Response to the European Commission's consultation on a possible framework for the recovery and resolution of nonbank financial institutions.
FSB Consultative Documents - on Shadow Banking
On 18 November 2012 the Financial Stability Board (FSB) published its three consultative documents regarding “Strengthening Oversight and Regulation of Shadow Banking”. The FSB will continue to review the progress of its shadow banking workstreams and expects to publish final recommendations in September 2013.
The ERC response concerning repo oriented aspects of these three FSB consultative documents can be found here.
BCBS/IOSCO - on margin requirements for non-centrally-cleared derivatives
On 6 July 2012 the BCBS and IOSCO published for public comment a joint consultative paper on “Margin requirements for non-centrally-cleared derivatives”. This joint consultative paper seeks stakeholders’ views on the formulation of consistent regulatory margin requirements across jurisdictions.
The ERC response concerning certain repo oriented aspects of this BCBS/IOSCO consultation can be found here.
HMT - on Broadening the UK Resolution Regime
On 1 August 2012 HM Treasury published for public comment a consultation paper on broadening the UK resolution regime to cover non-bank financial institutions. This consultation paper considers the best ways to deal with the risks associated with failures of investment firms, central counterparties, other financial market infrastructure firms and insurance companies.
The ERC response concerning repo specific aspects of this HMT consultation can be found here.
CPSS/IOSCO - on Recovery & Resolution of FMIs
On 31 July 2012, the CPSS and IOSCO published for public comment a joint consultative report on the “Recovery and resolution of financial market infrastructures” (“FMIs”). This joint consultative paper considers a wide range of potential measures intended to ensure that authorities across the globe have the powers and tools necessary to achieve effective resolution of systemically important FMIs.
The ERC response concerning certain repo oriented aspects of this CPSS/IOSCO consultation can be found here.
European Commission Green Paper - on Shadow Banking
On 19 March 2012 the European Commission published its “Green Paper on Shadow Banking”. On the basis of the outcome of this consultation and the work carried out by the ESRB and the ESAs, the Commission will decide on the appropriate follow-up regarding the shadow banking issues outlined in this Green Paper, including legislative measures, as appropriate.
The ERC response primarily concerning repo oriented aspects of this European Commission Green Paper can be found here.
FSB Interim Report - on securities lending and repos
On 27 April 2012 the Financial Stability Board (FSB) published its Shadow Banking Workstream’s “Interim Report on Securities Lending and Repos”. The financial stability issues identified therein will form the basis for the next stage of the Workstream’s work, which is to develop appropriate policy measures to address risks, where necessary, by the end of 2012.
The ERC response concerning repo oriented aspects of this FSB Interim Report can be found here.
Contacts:
Andy Hill
Managing Director, Head of Market Practice; Secretary to the Secondary Market Practices Committee and also responsible for overseeing repo policy; Member of the ICMA Executive Committee
Direct line: +44 20 7213 0335
Alexander Westphal
Senior Director, Market Practice and Regulatory Policy, secretary to the ICMA European Repo and Collateral Council and Committee (ERCC) and ERCC Operations Group.
Direct line: +44 20 7213 0333
