The use of repo is subject to a wide range of laws and regulations enforced by various regulatory agencies. Regulation has significantly intensified since the Great Financial Crisis (see question 29). In Europe, repo is impacted directly by laws and regulations implementing the EU Financial Collateral Directive as well as by the Short Selling Regulation and the Securities Financing Transaction Regulation (SFTR), and indirectly through regulation of market users such as commercial banks and investment banks by banking and securities market regulators under laws and regulations implementing the Capital Requirements and similar Directives and Regulations, which themselves implement the Basel III regime. There is a raft of other laws and regulations affecting the repo market in the EU, including the European Market Infrastructure Regulation (EMIR), the Markets in Financial Instruments Directive (MiFID) and Regulation (MiFIR), the Bank Resolution and Recovery Directive (BRRD), the Central Securities Depository Regulation (CSDR), a possible Securities Law Directive and the Crisis Management Directive. And, as part of the discussion on ‘shadow banking’, the Financial Stability Board is considering so-called macro-prudential regulation of collateral management through the use of devices such as mandatory minimum haircuts.
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