The future of securities financing

Abstract

Securities fi nancing (ie repos and cash-driven securities loans) provide short-term credit against securities collateral, and offer a valuable alternative to short-term bank fi nance. These markets are an important aspect of the shadow banking system, where unregulated maturity transformation and leverage was implicated in the recent fi nancial crisis. International regulatory reform initiatives, particularly by the Financial Stability Board, are timely, generally well-targeted and welcome. Less welcome is alarmism about the substantive law basis of securities fi nancing. This discussion is intended to show those concerns to be unfounded.