Secured Financing Transactions Data Store project

The European System of Central Banks (ESCB) has launched a project to build a data store for secured financing transactions (SFTs). The aim is to enable central banks in the EU, and possibly EU regulators, to obtain, store and analyse SFT data as of 2018. The data store will increase transparency in the SFT market and give EU authorities an additional tool to prevent financial stability risks and monitor global trends.

At a glance: Key facts

What are secured financing transactions?

SFTs are financing operations that involve the posting of a guarantee, or collateral, which is returned at the end of the operation to the institution requesting financing.

SFTs include:

  • repurchase transactions;
  • securities or commodities lending and securities or commodities borrowing;
  • buy-sell back transactions or sell-buy back transactions;
  • margin lending transactions.
Why do we need a common data store?

The data store will make the SFT market more transparent by providing detailed information on transactions concluded both inside and outside the banking system. This includes the shadow banking system: investment vehicles, funds, insurance firms, finance companies, etc.

The SFT market segment is of critical importance to the European central banks, especially for the monitoring of risks to financial stability, the micro-prudential supervision of financial firms and the conduct of monetary policy.

Legal framework

The data store project is part of the EU’s response to the recommendations on shadow banking risks set out by the Financial Stability Board in 2013. It derives from a new EU Regulation on the reporting and transparency of securities financing transactions that is due to enter into force by the end of 2015. Under the Regulation, SFT market participants will have to report SFTs to (authorised) trade repositories, who will in turn make the data available to the ESCB and the other authorities and regulators listed in it.

In developing the draft technical standards, the ESCB will cooperate with the European Securities and Markets Authority (ESMA) to ensure that its needs are taken into account.

Involving the market: the SFT Data Store Advisory Group

The ECB has set up an advisory group to give market participants the opportunity to provide information on the practices and standards used by the SFT market.

The Data Store Advisory Group will play an important role in determining key SFT indicators from the market’s perspective and providing information as to how SFTs are negotiated and managed by market participants during their life cycle.

The group is made up of representatives from European trade repositories, financial and non-financial institutions handling SFTs in the European market and European market infrastructure bodies providing SFT services.

The group will not be involved in any regulatory processes linked to the Secured Financing Transaction Regulation or to the drafting of the technical standards.