Coronavirus impact on securities lending, regulators' response

  • Identify key points under the SFTR reporting obligations
  • Explain Esma's recommendations in wake of Covid-19
  • Explain FCA's response following Esma's recommendations
Coronavirus impact on securities lending, regulators' response

On 18 March 2020, the European Securities and Markets Authority (Esma) published a statement about  regulatory forbearance for the first phase of reporting obligations under the Securities Financing Transactions Regulation (SFTR). 

These obligations are due to become effective on 13 April 2020 for credit institutions and investment firms when acting as counterparties. 

Esma says that it has been made aware of the pressure that the financial industry is facing to comply with SFTR amid the Covid-19 pandemic and recommends that national competent authorities (NCAs) do not prioritise supervision of these reporting obligations and apply a risk-based approach in terms of enforcement until 13 July 2020.  

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Esma’s statement also applies to the related reporting obligations for certain securities financing transactions (SFTs) under the Markets in Financial Instruments Regulation (Mifir).

In response, the FCA has updated its webpage on SFTR and has stated that it will not prioritise the supervision of these reporting requirements until at least 13 July 2020. 


SFTR entered into force on 12 January 2016 and is an EU-wide regulation aiming to address a lack of transparency relating to SFTs. 

SFTR captures SFTs such as repurchase transactions, lending and borrowing of securities and commodities, buy-sell back and sell-buy back transactions and margin lending transactions. 

SFTR introduces various measures including the requirement for counterparties to a SFT that is concluded, modified or terminated (within the past five years of the date of the transaction) to report the transaction to a trade repository (TR) or to Esma where no TR is available.  


SFTR provides for certain exemptions to the reporting obligations based on trade types, counterparties involved, systemic risk and financing type. 

Among the exempted trades are SFTs concluded with members of the European System of Central Banks. 

These transactions are not reported under SFTR but are subject to reporting obligations under Mifir. 

Esma’s public statement concerning regulatory forbearance 

Esma says that it has been made aware of the pressure that the financial industry is facing to comply with SFTR amid the Covid-19 pandemic. 

Reporting obligations for credit institutions, investment firms, and relevant third country entities are due to become applicable from 13 April 2020 in the first phase of the implementation. 

The next phase is due to start on 13 July 2020. 

Esma has decided not to initiate a formal delay of the first phase of the SFTR reporting go-live date, however, it expects NCAs not to prioritise their supervisory actions towards firms’ compliance with SFTR reporting obligations between 13 April and 13 July. 

Esma recommends that NCAs apply a risk-based approach in relation to non-compliance with SFTR and exercise their supervisory powers in a proportionate manner. 

Additionally, Esma now expects that TRs will not need to register ahead of 13 April 2020, which will give TRs more time to cope with Covid-19 and be ready to support the new reporting regime at a later point. ESMA expects TRs to be registered sufficiently ahead of the second phase.