Based on the initial recommendations to strengthen oversight and regulation of the shadow banking system as set out in its report submitted to the G20 in October 2011, the FSB set up the Workstream on Securities Lending and Repos (WS5) to assess financial stability risks and develop policy recommendations, where necessary, by the end of 2012 to strengthen regulation of securities lending and repos. In April 2012, WS5 published its interim report Securities Lending and Repos: Market Overview and Financial Stability Issues which provided an overview of the securities lending and repos markets, described their location in the shadow banking system, and discussed the financial stability issues arising from practices in these markets. In developing its policy recommendations, WS5's focus was on addressing the financial stability issues and are based on issues discussed in the interim report but with more focus on shadow banking risks so as to have a clear mapping to policy recommendations. WS5 has endeavoured to ensure that its recommendations minimise the risk of regulatory arbitrage as well as undue distortion of markets, and are consistent with other international regulatory initiatives.

The FSB welcomes comments on this consultative document. It especially welcomes comments to the questions raised in the document. Comments and responses to questions should be submitted by 14 January 2013 by email to fsb@bis.org or post (Secretariat of the Financial Stability Board, c/o Bank for International Settlements, CH-4002, Basel, Switzerland).