Regulatory framework for haircuts on non-centrally cleared securities financing transactions
The regulatory framework for haircuts on non-centrally cleared Securities Financing Transactions (SFTs) is intended to limit the build-up of excessive leverage outside the banking system, and to help reduce the procyclicality of that leverage. The framework is comprised of two complementary elements:
- Qualitative standards to be incorporated into existing or new regulatory standards for methodologies used by market participants that provide securities financing to calculate haircuts on the collateral received (including additional guidance for methodologies used by market participants to calculate margins on a portfolio basis);and
- A framework of numerical haircut floors that will apply to non-centrally cleared SFTs in which financing against collateral other than government securities is provided to non-banks.
Centrally-cleared SFTs and financing provided to banks and broker-dealers subject to adequate capital and liquidity regulation on a consolidated basis are excluded.
Market participants should establish appropriate internal processes and procedures to ensure haircuts are set in accordance with the framework.