SFTR – the day that wasn’t

Today was going to be the day…

For those of us involved in SFTR reporting, Easter was cancelled, last minute testing was to be cast aside and reporting was going into production. The initial report was expected to be small given that it was to cover securities financing transactions trading during the period Easter Saturday to Easter Monday but nevertheless we all waited anxiously in case of the inevitable teething problems that occur.

Instead, the world was plunged into crisis and an unexpected delay has happened. It will be more than four and a half years from the publication of the regulation to go-live for the now combined first and second phases – Banks, CCPs and CSDs. Crisis or not, this is a great gift for an industry that was not entirely ready for this regulation to become a reality.

Here are the top three things that banks should be doing to ensure that the additional three months are maximised:

1. Test, test, test

Like Covid-19, the key to reporting accuracy is testing, testing and more testing. Once satisfied that SIT and UAT testing are functioning correctly internally, with files passing the trade repository validation rules and ideally independently checked for completeness and accuracy, then it’s time to test with counterparties, market infrastructures, triparty agents, agent lenders and across the industry.

2. Put the right controls in place

Controls around reporting should never have been a Day 2 delivery but invariably were destined to be with an April go-live. This excuse has now gone. Therefore, SFTR reporting should have a full set of procedures, reporting policy and decisions made should be fully documented. A testing and reconciliation plan should be put in place internally, with appropriate management information in place to cover reporting completeness, timeliness, trade repository receipts and reconciliation breaks and the closure of those breaks.

3. Don’t mark your own homework

Implementing an independent quality assurance layer through periodic regulatory testing will ensure the regulation, technical standards, guidelines and updates have been implemented correctly and remain correctly interpreted as they and the business evolves. It will ensure that the firm is not marking their own homework and losing sight of the less obvious reporting issues they face. It will also reassure key stakeholders and national competent authorities that the regulatory obligations are taken seriously and managed most efficiently.

We are helping a number of firms prepare for SFTR reporting including pre go-live accuracy testing of reports as well as providing a full suite of post go-live assurance services to ensure the accuracy and completeness of your reporting.