ALFI’s position on the draft report of the EU Parliament on Shadow Banking

This draft own initiative report, to be adopted first by the ECON Committee and then in Plenary Session in the form of a Resolution, will represent the contribution of the European Parliament to the ongoing work of the FSB, the European Commission and other international bodies aiming at better monitoring and/or regulating shadow banking entities and activities. The vote of the report by the ECON Committee is currently scheduled for 22 October 2012 and its adoption in Plenary Session for 19 November 2012.

Amongst a number of other recommendations, the draft report of MEP El Khadraoui contains three proposals which - ALFI believes - are of particular relevance for our industry, in relation to repos and securities lending,  Money Market Fundsand ETFs.

Indeed, while recognizing the importance and benefits of these institutions/activities for the economy, the draft report invites the Commission to:

• Adopt measures (by the beginning of 2013) to increase the transparency of the repo and securities lending markets as well as to allow regulators to impose minimum haircuts or margin levels for the collateralised financing markets (see draft report, page 5, paragraph C13);
• Submit a legislative proposal (at the beginning of 2013) requiring Money Market Funds either to adopt a variable asset value with a daily valuation or, if retaining a constant value, to be subject to capital requirements (see draft report, page 6, paragraph C.15).
• Submit a legislative proposal (at the beginning of 2013) to tackle potential structural vulnerabilities of ETFs (complexity, counterparty risk, liquidity risk and possible regulatory arbitrage).

The ALFI position paper can be downloaded here.