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
- 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
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.
Esma has said that it will continue monitoring the implementation of SFTR as well as the impact of the relevant measures taken with regards to Covid-19, to ensure alignment of SFT reporting requirements and supervisory practices in the EU.
FCA Statement
The FCA supports Esma's position, will allow firms to focus their resources on critical functions during the pandemic and will not prioritise supervision of SFTR reporting requirements due by 13 April 2020 until at least 13 July 2020.
The FCA has said that it will not require firms to back report any SFTs that are concluded between 13 April and 13 July 2020, however, SFTs that are required to be backloaded should provide the requisite reports by using 13 July 2020 as the application date.
The FCA has also said that firms in scope of the first two application phase-in dates should continue to plan to meet their requirement to report SFTs under SFTR and Mifir from 13 July 2020.
The FCA has said that it will continue to keep this situation under review.
ICMA’s and ISLA’s letter to Esma: Covid-19’s impact on SFTR implementation effort
Esma’s statement was made in light of a letter from ICMA and ISLA requesting a delay to the SFTR reporting go-live date because of the Covid-19 pandemic.
Though this breathing space is much needed, it remains to be seen if further regulatory forbearance measures will be required for phase two.The trade associations have cited the following examples of how Covid-19 has critically compromised firms SFTR implementation programmes:
