The SFTR Collateral Conundrum

The SFTR Collateral Conundrum

SFTR go-live is being hailed by many as a great success. On the banking side, the reporting firm’s ability to submit SFTR reports to trade repositories and have those reports accepted is seen as a significant achievement.

Pairing and matching rates low

Unfortunately, if you dig a little deeper, the picture is somewhat less rosy. The initial anecdotal evidence from market infrastructures and dealers is that pairing rates (where the UTIs and counterparties are the same) are quite low. The matching rates (where the further reconcilable fields match the counterparty) on loans are very low (with breaks in most empirical values where ESMA gives very limited or zero tolerance), and in many cases, the pairing of collateral reports is non-existent. Indeed, the trade repositories are mandated to make some aggregated data public on a weekly basis* – these figures corroborate the lack of matching, particularly of collateral. The reported data is also neatly summarised by ICMA in its weekly report. These findings will come as no surprise to many as SFTR requires firms to populate 155 fields, across four reporting tables and 10 action types with many complex rules to adhere to.

Collateral reporting challenges

At Kaizen, we predicted collateral reporting was going to be a particular challenge, and wrote guidance on this very subject for industry participants in the latest Securities Lending Times SFTR Annual. Furthermore, our award-winning ReportShield™ Accuracy Testing is now available for SFTR reporting to give you the confidence to stand by the quality of your reporting in dealing with reconciliation queries and in front of your regulators.

Contact us for a conversation about your collateral reporting or SFTR reporting more generally with one of our regulatory specialists. 

*(Opens to external websites).See: DTCC, KDPW.