SFTR Transaction reporting. Transparency of Securities Financing Market STRATEGY & MANAGEMENT CONSULTING PARIS LONDON LUXEMBOURG ASIA

Transcription

1 SFTR Transaction reporting Transparency of Securities Financing Market STRATEGY & MANAGEMENT CONSULTING PARIS LONDON LUXEMBOURG ASIA

2 Contacts Dominique Herrou, Luc Estang Your contacts to discuss SFTR reporting: Dominique HERROU Partner Tel: +33 (0) Tel: dominique.herrou@aurexia.com Luc ESTANG Senior Manager Tel: +33 (0) Luc.estang@aurexia.com 2

3 Context & objectives Reporting obligation SFTR transaction reporting EMIR like reporting obligations for securities financing transactions Following the global financial crisis, the ESRB and the European Commission have explored various ways to regulate the so-called «Shadow Banking» sector. Scope The EU Securities Financing Transactions Regulations (SFTR) came into effect on 12 January 2016 and aims at regulating and increasing the transparency of securities financing transactions in three ways: By requiring counterparties to report SFTs to a EU approved trade repository By imposing condictions on the Collateral re-use. The collateral provider has to give explicit writing consent about risks & consequences of such agreement. By requiring Funds managers to inform investors of their use of SFTs and total return swap in their reports (pre-investment documentation, periodical reports) Reuse requirements and reports transparency obligations respectively came into effect on 13 July 2016 and 13 January The reporting obligation follows a phased-in approach over a period between 12 to 21 months after the RTS comes into force. Consequently, the reporting obligation should start in 2018 assuming RTS will entry into force in Q EU legal entities Products Branches of EU legal entities regardless of their location EU branches of third country counterparties Repurchase transactions for securities, commodities and guaranteed rights; lending & borrowing transctions on securities & commodities; buy sell back & sell buy back of securities, commodities & guaranteed rights; margin lending transactions Reporting Individual securities financing transaction have to be reported by both sides of the transactions to a EU approved trade repository the day after the transaction at the latest 3

4 Reporting timeline Ground work should start now to be ready for Q The actual start date of the reporting obligations depends on RTS reporting requirements. The reporting will start 12 months (Banks & IF), 15 months (CCPs & CSDs), 18 months (Insurance & funds) and 21 months (non financial counterparties) after RTS entry into to force. 29 january 2014 Q (est) Q (est) Q (est) European Commission SFTR proposal Final RTS entry into force CCPs & CSDs RTS + 15 months Non financial counterparties RTS + 21 months January 2016 Q (est) Q (est) SFTR entry into force Banks & investment firms RTS + 12 months UCITS, AIFs, Insurance & pension funds RTS + 18 months 4 Dates are subject to the legislative process

5 Transaction reporting requirements SFTR transaction reporting generally follow the same structure as EMIR for derivatives What Who When? To whom? What data? New, modified or terminated SFTs are to be reported to an approved trade repository by t+1 Obligation applies to existing trades : those concluded before the reporting start date (SD) with a remaining maturity of 180 days & open trades 180 days after SD Both parties to a trade must report Financial counterparties dealing with SMEs report on behalf of these counterparties Funds manager must report on behalf of their funds Possibility to delegate the reporting SFTs transactions must be reported by T+1 Trade repositories registered or recognized for SFTR ESMA otherwise SFT parties UTI Principal amount and currency Securities lent/borrowed Asset used as collateral, type, quality and value Method used to provide collateral Availability fo re-use & reused Y/N Repo,lending fee / rebate rate or margin lending rate Haircut Value date, maturity date & first callable date Market segment 5

6 Challenges RTS draft has highlighed data & technology challenges for the reporting implementation Gather & structure disparate trade data Many of the fields presented in the level 2 draft may not electronically stored and/or easily available, to name a few: collateral maturity dates, issuer credit ratings, information related to re-use eligibility and actual re-use Capture the LEI If many market participants already have a LEI code, they still need to consider upgrading their systems to capture and populate the LEI codes for existing transactions. Generate & assign UTI The Industry has to agree on how and when the UTI will be assigned during the transaction lifecycle. The connectivity will need to be set up to capture it in a timely manner. Determine the reporting party Even tough SFTR is a two sided reporting, there are many cases where only one party will report. Ex: the Belgium branch of US borrower will take charge of the report when facing a Japanese lender. This logic needs to be set up in the reporting system. 6

7 Aurexia in a nutshell About our company A consultancy focused on financial services: Aurexia was founded in Paris in 2006 on the belief that the financial services industry needed more than pure management consulting skills from its service providers. Coming from leading consultancies, Aurexia founders supplemented deep domain knowledge with pragmatism and practicality to partner with clients in the delivery of key transformation programmes. This approach has led to Aurexia partnering with the top 5 investment banks in Europe. Aurexia has matured in to a global consultancy opening its London office in 2014, followed by Luxembourg in 2015 and Asia (Singapore and Hong Kong) in This strategic growth has allowed Aurexia to be better positioned to support historical clients needs and broaden its client base to more industry leaders. Our values: Respect Team spirit Knowledge sharing Business expertise Quality first Innovation Our values Business areas we cover in London: CORPORATE & INVESTMENT BANKING FINANCE & RISK MANAGEMENT INVESTOR SERVICES INSURANCE PRIVATE BANKING & WEALTH MANAGEMENT Since our establishment at the end of 2006, the average growth rate of our activities is 25% with more than 30 customer references. To accompany the development of our international clients, we are gradually opening new offices, aiming to cover 5 continents in the short term. Aurexia consultants at the core of our business: What makes Aurexia special is a unique blend of industry expertise, a solution oriented mind-set and best in class transformation skills. Aurexia consultants are decisive in scoping, launching and implementing their clients projects. They all possess the necessary soft skills to integrate into client teams delivering as a single unit. We have built an internal framework that ensures each Aurexia consultant has a forward looking vision of our industry challenges and opportunities. Throughout their career at Aurexia, consultants actively participate in the company s industry review and thought leadership. We support and encourage an entrepreneurial outlook and independent thinking. 7

8 Our business areas Core activities FINANCE & RISK MANAGEMENT Finance Risk Management Challenges: strengthening the advisory role cost reduction target (offshoring/nearshoring) regulatory compliance RETAIL BANKING Retail Banking Wealth Management Challenges: digital transformation know your customers needs advisory duty and compensation policy innovation and operational efficiency solvency and liquidity requirements INSURANCE Life & non-life Health Challenges: digital transformation of distribution channels empowering front to back processes marketing process compliance (KYC, ) regulatory requirements (Solvency II,,..) INVESTOR SERVICES Asset Management Securities Services Challenges: distribution strategies and digitalized platforms concentration and merger of market participants organizational challenges (market data, IT) integration of project sites (T2S) development of value added services regulatory avalanche BANQUE DE FINANCEMENT & D INVESTISSEMENT Capital Market Global Transaction Banking Challenges: Optimisation des business modèles Nouvelles lignes métiers orientés clients Réduction de coûts et efficacité opérationnelle Data management Ratios règlementaires 8

9 CLIENTS Aurexia Institute Our research institute, serving our customers 9 MARKETS 5 COUNTRIES MARKETS Contributions Assistance Quality enhancement REGULATORS REGULATORY watch BANKS BUSINESS watch Partners & Managers 1to1 pitch, conferences DISRUPTORS Studies, Projects, Interviews, visits, Press ORGA watch SYSTEMS watch Marketing Team Publications, mailings VENDORS LinkedIn Interviews Newsletters Articles 9

10 Digital strategy New era of banking Banking 2.0: As banking licenses become easier to obtain and new technology has created a demand for new customised services, banks must adapt to take advantage of these new trends and stay abreast of their competition. Change is required at every level within the organisation, from business and operations, to technology and architecture. Using design-led thinking to put the client at the centre of all decisions. Banks are looking at bringing innovation faster to clients by partnering with FinTechs, using digital labs safeguard from bureaucracy. Providing sandpit environments and open APIs to increase the likelihood of success. These new dynamic organisations need a cleaner technology landscape, with a flat architecture allowing applications to be released as modules (i.e. in sprints) instead of large change programmes. Banks can also use this opportunity to leverage future state architecture to improve operational control and reducing cost through greater operational efficiency. As regulators become more granular in their reporting standards, a clean IT landscape should make reporting tools easier to create. How Aurexia can help: Incorporating design-led thinking through workshops and design sessions held throughout the organisation Restructure TOMs to be more in line with become more adaptable to change Create and execute future state roadmap to provide a flatter IT landscape and apply a module based approach to IT delivery Realise the full benefits of simplified IT landscape by providing governance and oversight on decommission and archiving of applications Provide in-depth understanding of innovations currently available. We have sort out digital innovation with events such as the FinTech awards to showcase and analyse these new solutions. Have partnerships with FinTechs we recognise are providing truly disruptive innovation that we know will be most beneficial to the industry. Aurexia Service Offerings: Client Centricity Restructure Target Operating Model Future State Architecture Application Simplification Digital Innovations Business Architecture Technology Design-led thinking Target operating model Flat architecture Easily integrated IT landscape 10

11 Our Offices Worldwide locations PARTNER Dominique HERROU PARTNER Éric VERNHES PARTNER David VILLARD PARTNER Charles BAIN de la COQUERIE COO Nicolas OLIVEROS Matthieu TOULOTTE Dominique HERROU Caroline SMADJA PARIS LONDON LUXEMBOURG ASIA Singapore Hong Kong rue de Caumartin, Paris + 33 (0) Fore Street London EC2Y 5EJ +44 (0) Avenue de la Gare, L-1610 Luxembourg +352 (0) Robinson Road #11-04 SIF Building Singapore

12 Partners Offices Dominique Herrou +33 (0) Charles Bain de la Coquerie +33 (0) Paris Office 62 rue Caumartin, Paris, France + 33 (0) Luxembourg Office 8-10 Avenue de la gare L-1610 Luxembourg +352 (0) Eric Vernhes +33 (0) eric.vernhes@aurexia.com David Villard + 33 (0) david.villard@aurexia.com London Office 1 Fore Street, London EC2Y 5EJ, United Kingdom +44 (0) Asia Office 96 Robinson Road #11-04 SIF Building Singapore AUREXIA