Newsletter 106 from October 21, 2009 Consultation Period begins on FINMA Circular on Repo/SLB

Newsletter 106 - Consultation Period begins on FINMA Circular on Repo/SLB - FINMA, the Swiss Financial Market Supervisory Authority, has started the consultation period on its circular on repos and and the lending and borrowing of securities (Repo/SLB), which is scheduled to come into force on 1 January 2010. Securities lending and borrowing or SLB has become an important instrument in the securities market in recent years. Among other methods, SLB represents an important way of obtaining securities in the money market, which is crucial for monetary policy. Repos have proven to be a reliable way for the Swiss National Bank to manage interest rates and liquidity, even in exceptional circumstances. SLB can be performed with or without cover. A significant share of securities is borrowed without cover, mainly from private and corporate clients. The aim of the circular is to examine how SLB should be handled in the context of current liquidity regulations. Furthermore, detailed requirements on disclosure, the content of master agreements, processing and settlement are aimed at protecting creditors and investors involved in SLB. Due to the associated risks, the intention of this circular is to restict uncovered SLB for unqualified investors. The consultation period runs until 2 November 2009.