knowledge | 19 March 2020 |
COVID-19: Impact on Reporting Securities Financing Transactions
Reporting under the Securities Financing Transactions Regulation1, or SFTR, was due to start on 13 April 2020 for banks and certain investment firms. However, as the financial industry is already facing significant challenges due to the COVID-19 virus, ESMA has issued a public statement (the “Statement”) according to which national competent authorities should not prioritise their supervisory actions with regard to the reporting obligation until 13 July 2020 (here).
Under the SFTR certain counterparties to securities financing transactions (“SFTs”) must report the details of that transaction, as well as any modification or termination thereof, to a registered or recognised TR no later than the working day following the conclusion, modification or termination of the transaction.
The SFTR reporting regime is being introduced on a phased in basis, with banks, investment firms and certain third country entities due to start reporting on 13 April 2020. For further information, see our briefing here.
ESMA issued the Statement on 18 March 2020, to ensure the coordination of supervisory actions in response to the impact of COVID-19, in particular regarding the reporting requirement start date.
In the Statement, ESMA recognises that the start date is fast approaching and that firms impacted by the reporting requirement simultaneously face severe resource restrictions as a result of implementing their business continuity plans in response to COVID-19.
Consequently, ESMA expects competent authorities not to prioritise their supervisory actions towards entities in scope of the SFTR reporting obligations as of 13 April 2020 and until 13 July 2020, including with respect to SFTs concluded during that period. In addition, ESMA recommends that competent authorities should generally apply the risk-based approach in their day-to-day enforcement of applicable legislation in this area in a proportionate manner.
Regarding trade repositories (“TRs”), the Statement says that ESMA does not consider it necessary to register any TR ahead of 13 April 2020. However, ESMA expects TRs to be registered sufficiently ahead of the next phase of the reporting regime, i.e. 13 July 2020, for entities that will start reporting on that date.
The Statement comes a few days after the International Capital Markets Association (“ICMA”) and the International Securities Lending Association (“ISLA”) wrote a joint letter to ESMA requesting it to either initiate the procedure for obtaining a formal delay of the SFTR reporting go-live date to 11 October 2020 or to consider other measures to achieve a similar delay. In the absence of a formal delay, ICMA and ISLA asked ESMA, at a minimum, to consider equivalent measures that would provide forbearance and sufficient reassurance for firms that they are not expected by ESMA and their respective national competent authorities to ensure strict compliance with SFTR reporting obligations for an appropriate period of time following the legal reporting start date. The letter is available here.
- Regulation (EU) 2015/2365 of the European Parliament and of the Council of 25 November 2015 on transparency of securities financing transactions and of reuse and amending Regulation (EU) No 648/2012 (OJ L 337, 23.12.2015, p. 1).
This briefing is for general guidance only and should not be regarded as a substitute for professional advice. Such advice should always be taken before acting on any of the matters discussed.