The Council presidency and the European Parliament have reached an agreement on new regulation concerning the transparency of securities lending and repurchase transactions.

The regulation aims to enhance financial stability by proposing binding transparency and reporting requirements for securities financing transactions.

The agreement was reached during a trilogue meeting in Brussels. Trilogues started on April 28 2015.

The regulation will require securities financing transaction reporting to be more efficiently made to trade repositories and investors in collective investment undertakings. 

The draft regulation introduces measures to improve transparency in three main areas:

1. The monitoring of the build-up of systemic risks in the financial system related to securities financing transactions

2. The disclosure of information on such transactions to investors whose assets are employed in the transactions

3. Rehypothecation activities, a practice by banks or brokers of reusing for their own purposes collateral pledged by their clients.

The European Parliament said that improved transparency will prevent banks and other financial intermediaries from attempting to circumvent regulation by shifting parts of their activities to the less-regulated shadow banking sector.

Securities financing transactions have been defined as any transaction that uses assets belonging to the counterparty to generate financing. This includes lending or borrowing of securities and commodities, repurchase (repo) or reverse repurchase transactions, or buy-back/sell-back transactions.

The agreement will be confirmed within a few days by the Permanent Representatives Committee, on behalf of the Council. 

The regulation will then be submitted, following legal-linguistic revision, to the European Parliament for a vote at first reading, and to the Council for adoption.