MFA Submits Comments to Financial Stability Board on Securities Lending and Repo Markets

On November 28, MFA filed a comment letter in response to the Financial Stability Board’s consultative document — FSB Policy Framework for Addressing Shadow Banking Risks in Securities Lending and Repos.  In the letter, MFA expressed support for the FSB’s goal of identifying regulatory gaps and ensuring appropriate regulation of activities that create systemic risk.  MFA encouraged the FSB and other relevant policy makers to: (1) consider existing regulatory reporting requirements to ensure that any new requirements are not duplicative of existing requirements and to tailor the scope of reporting to investors in light of the level of risk from a fund’s securities lending or repo activities; (2) conduct further market impact analyses prior to proposing potentially significant rules on collateral valuation and management, cash collateral reinvestment, and limits on re-hypothecation of client assets; and (3) consider unintended consequences that could result from the FSB’s proposed numerical floors for haircuts on collateral and, to the extent the FSB does propose such floors, to do so in a consistent manner across different jurisdictions, market participants, and transaction types.