MFA Submits Comments to FSB Regarding Securities Lending and Repo Markets

The MFA has submitted a comment letter to the Financial Stability Board ("FSB") regarding its consultative document titled "FSB Policy Framework for Addressing Shadowing Banking Risks in Securities Lending Repos."

In the comment letter, the MFA commended the FSB's goal of identifying and addressing gaps in regulation, and identifying shadow banking activities that create systemic risk. The MFA encouraged the FSB to carefully consider the types of information that would be most valuable to regulators before designing a new reporting framework. The MFA recommended that the FSB conduct a review of the tri-party custody books at major custodians in order to gain a better understanding of the type of information needed to identify the build-up of systemic risk. With regards to cash collateral reinvestment, rehypothecation of client assets, and collateral valuation management, the MFA recommended that the FSB conduct further analysis to determine the financial impact of the potential new rules.

See: MFA Comment Letter; MFA Press Release.See also: FSB Policy Framework: "Strengthening Oversight and Regulation of Shadow Banking".