New securities finance transaction regulations will not impede the market, Martin Mitov, policy officer at the European Commission said. Explaining the proposal for the structural reform of the EU banking sector issued on January 24, Mitov insisted that the Emir-like reforms would only impact transparency.

“This proposal is only about transparency. It doesn’t restrict in any way transactions themselves and it doesn’t restrict counterparties that engage in transactions, be they banks or non-banks,” he said.

The regulations, which are currently going through the European Parliament, would require transparency of securities lending and repo transactions from financial institutions towards authorities as well as between fund managers and end investors.

They also include minimum standards for cash collateral reinvestment, rehypothecation of client assets, including necessitating prior consent from parties involved, as well as standards for collateral valuation and management.

“The basic principle is that all counterparties, be they financial or non-financial, will be required to report details of their asset lending transactions,” said Mitov.

The proposal is part of the structural (alternatively, the shadow banking) reform agenda. There was a need to shed light on securities financing market, the most important market where banks and non-banks transact, after the financial crisis highlighted the need to improve transparency, Mitov explained.

The exact details of what will need to be reported are yet to be released by the European Commission. He said it could be possible for firms to delegate reporting to a third party and also that reporting to investors could be done through established means to reduce cost.

“This proposal is an important step to better understand and reduce the risks associated with shadow banking,” concluded Mitov. “Together with existing regulations for post-trade markets it presents the building blocks for a more honest, efficient and transparent securities market in Europe.”