05 February 2018
Reporter: Jenna Lomax

SBL represents structural vulnerability, says IOSCO

The board of the International Organisation of Securities Commission (IOSCO) has cited securities lending as a systemic risk to the industry in 2017 report on the liquidity risk management.

The 2018 Liquidy Recommendations report has been introduced for the “constantly changing market environment for which those responsible for managing CIS must be prepared”.

In association with the Financial Stability Board (FSB), IOSCO issued 14 recommendations for the its 2018 report to emphasise the importance of ensuring the quality of day-to-day liquidity management where CIS’ are designed to have frequent dealing arrangements.

IOSCO states this updated approach “acknowledges that there is no ‘one size fits-all’ solution”.

Among the recommendations, IOSCO, stated: “The responsible entity should draw up an effective liquidity risk management process, compliant with local jurisdictional liquidity requirements.”

IOSCO explained that the liquidity risk management process, and its operation, is the fundamental basis of liquidity control within CIS’.

Another recommendation was that the responsible entity should conduct ongoing liquidity assessments in different scenarios, which IOSCO said should include fund level stress testing, in line with regulatory guidance.

IOSCO explained: “Stress testing can assess how the liquidity profile of, or redemption levels of, a CIS can change when faced with various stressed events and market situations. It is an important component of a responsible entity’s liquidity risk management process.”

It added: “Stress testing should support and strengthen the ability of the responsible entities in managing liquidity risk appropriately in the best interests of investors.”

Building on its 2017 Consultation on Collective Investment Schemes (CIS), and its 2013 Liquidity Report, IOSCO sent out a consultation with a closing date of 18 September 2017, to establish its 2018 Liquidity Recommendations. It received 25 formal responses.

The 2013 Liquidity Report, which took into account the lessons learned from the financial crisis of 2007-10, reflected the approach taken by member jurisdictions having responded to those events.

More news
The latest news from Securities Lending Times
Join Our Newsletter

Sign up today and never
miss the latest news or an issue again

Subscribe now
BoE release consultation on a new rule for central counterparties
16 February 2018 | London | Reporter: Jenna Lomax
BoE states that this proposed rule of written notice would “support the UK Government’s approach to the implementation of the EU Network and Information Systems Directive”
ASX sees 5.8 percent increase in collateral management activity
16 February 2018 | Sydney | Reporter: Jenna Lomax
The increase in the use of derivatives and OTC was due to a rise in futures trading, OTC clearing and collateral management activity
SBL Network bolsters its P2P securities lending team
16 February 2018 | London | Reporter: Jenna Lomax
SBL Network Limited has hired Charlotte Clout, reporting to Tammy Phillips, CEO at SBL
Citi’s agency lending sales chief departs
16 February 2018 | New York | Reporter: Drew Nicol
Citi’s Americas head of sales for it’s agency securities lending, collateral management, and separate account cash management businesses, Jeff Bonaldi, has left to pursue a number of entrepreneurial ventures
SIFMA testifies on legislative proposals regarding derivatives
15 February 2018 | Washington DC | Reporter: Brian Bollen
SIFMA has testified to the US House of Representatives Committee on Financial Services Subcommittee on areas that could make regulations more risk-sensitive, less complex and clearer
More than 35 percent of investors asked are planning to add to their European exposure in 2018
ECB rings collateral changes
14 February 2018 | Frankfurt | Reporter: Brian Bollen
The European Central Bank has issued a series of amendments relating to the Eurosystem’s monetary policy implementation