Securities Financing Transactions Regulation
In January 2014, the European Commission (EC) published a proposal to regulate the reporting and transparency of securities financing transactions (SFTs). Broadly speaking these are transactions where securities are used to borrow cash or other securities. They include securities lending, repurchase agreements (repos), and similar collateralised operations consisting of a transfer.
The Securities Financing Transactions Regulation (SFTR) is part of the EU’s implementation of the global effort made to regulate the so-called “shadow banking sector”, i.e. financing provided other than by credit institutions. The Financial Stability Board (FSB) started addressing shadow banking in 2011 and identified SFTs as sources of financing that could be provided in parallel to traditional banking.