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ISLA welcomes ESMA's easing on collateral  

February 21, 2014
Georgina Lavers, Securities Lending Times

ESMA’s proposal to ease up on certain collateral diversification rules contained in its guidelines for ETFs and other UCITS has been met with open arms by the International Securities Lending Association.

The European and Securities Market Authority’s current guidelines require that no more than 20 percent of the NAV of a UCITS may be held in collateral from any one issuer.

In the consultation, ESMA consider allowing a derogation from this provision for government issued collateral in certain circumstances. The proposal is that this derogation should be limited to money market fund UCITS only to allow them to use higher volumes of reverse repo against a single government issuer.

ISLA argues that whilst it supports the proposal, the derogation should be available to all UCITS, and not just money market funds (MMF).

Read more: Securities Lending Times

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