Finperform responds to ESMA on SFTR Implementation
Finperform a leading management consulting firm has submitted their response to ESMA on their consultation for SFTR implementation.
There are a number of areas, where Finperform is of the view that the proposal by ESMA on SFTR may not be practical for the financial institutions in a number of areas. Finperform has highlighted the below items as a sample
1) Availability of issuer LEI: One of the mandatory field proposed by ESMA is the LEI of the issuer of security that is used as a collateral. The collaterals that are currently used in the securities financing transactions cover the entire global pool of securities. Given the low take up of LEI on Non-European financial institutions, it is impossible to provide LEI for the issuers. As this is a mandatory field, the trades which does not have the issuer LEI will fail validation and hence will not be submitted to ESMA. ESMA will have no way of identifying the number of trades or the value of such trades which does not have issuer LEI, given they were not submitted in the first instance. Unlike MifID, the parties to the securities financing transaction has no direct relationship with the issuer of the security, thereby forcing them to create a LEI.
2) Credit Quality: Finperform is of the view that ESMA should change the field characteristic of "Credit Quality" as a non-matching field, as the credit quality is bank specific based on assessment of individual financial institution, and likely to differ between financial institutions. These reconciliation items will increase the noise in reporting, however not adding further value to the financial institution or to the regulator.
3) UTI Generation requirements:
Finpeform has also raised a number of other items in its response to ESMA including suggested higher tolerance levels for FX rates & prices, additional clarification of trades which involves an EU branch.
Suriya Subramanian, Finperform's Managing Director has commented that " We welcome the spirit of SFTR, however there are a number of practical issues that needs to be considered by ESMA and provide further guidance in their next release. SFTR implementation will be successful only if the regulator listens to the financial institutions and market participants on the practicalities"
See further details at http://finperform.co.uk/