05 November 2013

FSB launches QIS2 on proposed regulatory framework for haircuts on securities financing transactions

The FSB noted that, although most of the policy measures were finalised, certain proposed measures would be finalised in light of further assessments of their potential impact on the financial system. These include proposals on a regulatory framework for haircuts on non-centrally cleared securities financing transactions, which consists of (i) minimum standards for methodologies to calculate haircuts on non-centrally cleared securities financing transactions and (ii) a framework of numerical haircut floors that will apply to non-centrally cleared securities financing transactions in which entities not subject to regulation of capital and liquidity/maturity transformation receive financing from regulated financial intermediaries against collateral other than government securities. The FSB invited comments from the public on these proposals by 28 November. As part of the development of these proposals, the FSB had launched a two-stage QIS in April 2013.

The first stage (QIS1) consisted of a data request to a group of 17 large financial intermediaries (banks and broker-dealers) from 12 jurisdictions on historical haircut distributions at three specific points in time (pre-crisis, post-crisis and current) in order to help calibrate detailed minimum haircut proposals. This first stage also included qualitative questions asking participating firms to provide a general description of the factors they take into account and the approach they follow when setting haircuts on securities financing transactions. The summary of QIS1 results is set out in Annex 3 of the August Report.

The second stage of this exercise (QIS2) is now being launched and comprises a more comprehensive quantitative assessment of the impact on a broader set of firms of the FSB’s detailed haircuts proposals, both the proposed minimum standards for methodologies used by firms in calculating their own haircuts and the numerical haircut floors to be applied to certain securities financing transactions.  For the purpose of QIS2, these terms are defined as follows:

(i) Regulated financial intermediaries (banks and broker-dealers) are financial intermediaries that are subject to prudential liquidity and capital regulation.

(ii) Agent securities lenders are entities that lend securities on behalf of clients.

(iii) Non-banks are entities that do not fit either of the above categories, and would include asset managers, insurance companies, pension funds and hedge funds, among others, that obtain financing using securities financing transactions.

The QIS2 instructions and reporting templates to assess the impact of the proposals for each type of entity are now available on the FSB website, and the FSB is inviting interested market participants to voluntarily participate in the exercise. As in the case of QIS1, all data will be treated as strictly confidential, anonymised for global analysis (except for the name of the jurisdiction where the headquarters is located and the type of entity) and used only for the purpose of assessing the impact of the minimum haircut proposals and refining these proposals. Interested firms are asked to fill in the templates and respond to the questionnaire on a voluntary basis by 23 December, 2013. Analysis of the QIS2 results will help the FSB refine and finalise its recommendations by the second quarter of 2014.

Full press release

Instructions for the QIS2 for regulated financial intermediaries (banks and broker-dealers)

Instructions for the QIS2 for agent securities lenders

Instructions for the QIS2 for non-banks

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