ALFI responds to the EU Commission consultation on the review of the Directive on financial collateral arrangements (FCA)

In parallel to the Securities Finality Directive (SFD), the Financial Collateral Directive (FCD) is reviewed as it is closely related. For the FCD to continue to serve its purpose, it is important to consider developments that could affect its functioning and to ensure coherence across legislative frameworks. Relevant issues can arise from market developments (economic, financial or technological) and/or regulatory changes. Two issues that are dealt with in this consultation are also important for the SFD: recognition of ‘close-out netting provision’ and ‘financial collateral’ (‘cash’ and ‘financial instruments’ the two most commonly used forms of ‘collateral security’ under the SFD).

Overall, ALFI’s position is not to modify well known market functioning rules. Input was provided in particular on two dimensions:

1.  on the status of digital currencies, such as central bank currencies and stable coins (Ch 5.2)
2. on the clarification of the notion of book entry for the purposes of evidencing the provision of cash or securities collateral provided through, in order to obtain legal certainty from the Commission (Ch. 5.5.2.)

Read the ALFI response here.