REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND THE COUNCIL on the International Treatment of Central Banks and Public Entities Managing the Public Debt with regard to Securities Financing Transactions
Date: 2019-01-30
Institutions: Directorate-General for Financial Stability, Financial Services and Capital Markets Union, European Commission
Subjects: United Kingdom, central bank, financial legislation, financial supervision, financial transaction, public debt, public sector, securities, withdrawal from the EU

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  EN 

   EUROPEAN COMMISSION  Brussels, 30.1.2019  COM(2019) 63 final  REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND THE COUNCIL on the International Treatment of Central Banks and Public Entities Managing the Public Debt with regard to Securities Financing Transactions  
 
 
1. 

INTRODUCTION 

Regulation (EU) 2015/2365 on the transparency of securities financing transactions and 
of reuse (SFTR) was adopted on 25 November 2015 and entered into force on 12 January 
2016.  SFTR  aims  at  increasing  the  transparency  of  securities  financing  transactions 
(SFTs) by requiring: 

  all SFTs to be reported to central databases known as trade repositories (reporting 

obligation), 

 

information on the use of SFTs by investment funds to be disclosed to investors 
in the regular reports and pre-investment documents issued by the funds, 

  minimum  transparency  conditions  to  be  met  when  collateral  is  reused,  such  as 
disclosure  of  the  risks  and  the  obligation  to  acquire  prior  consent  (reuse 
transparency requirements). 

According to Article 2(2)(a) of SFTR, the Union’s central banks and Union public bodies 
charged  with  or  intervening  in  the  management  of  public  debt  are  exempted  from  the 
reporting obligation and reuse transparency requirements under SFTR. 

At  the  time  of  adoption  of  SFTR,  there  were  uncertainties  on  the  treatment  of  foreign 
central  banks  in  the  application  of  SFT  related  reforms  in  other  jurisdictions.  The 
European Parliament and the Council therefore postponed a decision on the application 
of SFTR to third-country central banks until more clarity could be reached on this issue. 

Article 2(4) of SFTR empowers the Commission to adopt a delegated act to extend the 
list  of  exempted  entities  under  SFTR.  As  a  pre-requisite  for  such  an  exemption,  the 
European  Commission  is  required  under  the  same  Article  of  SFTR  to  analyse  the 
international  treatment  of  central  banks  and  of  public  bodies  managing  public  debt  in 
other  jurisdictions’  legal  framework  and  to  inform  the  European  Parliament  and  the 
Council  of  its  analysis.  If  the  report  concludes  that  the  exemption  of  the  monetary 
responsibilities of third-country central banks from the reuse transparency requirements 
is necessary, the European Commission shall adopt an according delegated act. 

2.  THE REPORT'S LEGAL BASIS: SFTR ARTICLE 2 REQUIREMENTS 

SFTR Article 2(2) provides that "Articles 4 and 15 do not apply to: (a) members of the 
European System of Central Banks (ESCB) and other Member States' bodies performing 
similar  functions,  and  other  Union  public  bodies  charged  with,  or  intervening  in,  the 
management of the public debt; (b) the Bank for International Settlements". 

With  regard  to  foreign  central  banks  and  foreign  public  bodies  managing  public  debt, 
Article  2(4)  empowers  the  Commission  to  adopt  delegated  acts  to  amend  the  list  of 
exempted entities in Article 2(2) and, to that end, requires the Commission to "present to 
the European Parliament and the Council a report assessing the international treatment 
of central banks and of public bodies charged with or intervening in the management of 
the public debt". 

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Article  2(4)  also  specifies  that  "The  report  shall  include  a  comparative  analysis  of  the 
treatment of central banks and of those bodies within the legal framework of a number of 
third  countries.  Provided  that  the  report  concludes,  in  particular  in  regard  to  the 
comparative  analysis  and  potential  effects,  that  the  exemption  of  the  monetary 
responsibilities  of  those  third-country  central  banks  and  bodies  from  Article  15  is 
necessary, the Commission shall adopt a delegated act adding them to the list set out in 
paragraph 2 of this Article." 

3.  JURISDICTION CONSIDERED: UNITED KINGDOM 

SFTR  requires  the  Commission  to  conduct  a  comparative  analysis  of  the  treatment  of 
central banks and public bodies managing public debt in "a number of third countries". 
Given the  United Kingdom’s intention to  withdraw from the  Union pursuant  to  Article 
50 of the Treaty on European Union, when Union law ceases to apply to an in the United 
Kingdom, the exemption for members of the European System of Central Banks (ESCB) 
and  public  bodies  charged  with  or  intervening  in  the  management  of  public  debt  in 
Article 2(2)(a) of Regulation (EU) No 2015/23651 (“SFTR”) will no longer apply to the 
United  Kingdom  central  bank  or  public  debt  management  bodies.  Against  this 
background, this report restricts the analysis of the treatment of central banks and public 
bodies managing public debt to the United Kingdom. Further countries will be analysed 
in a future report. 

The approach to focus on the United Kingdom in a first step is supported by the fact that 
the  European  Union  (Withdrawal)  Act  2018  adopted  by  the  United  Kingdom  converts 
into UK domestic law the existing body of directly applicable EU law, including SFTR. 
Furthermore,  the  UK  government  published  a  draft  statutory  instrument2,  which  will 
make  amendments  to  retained  EU  law,  and  existing  UK  law,  related  to  securities 
financing transactions, to be laid under the European Union (Withdrawal) Act 2018. The 
draft  statutory  instrument  mirrors  the  SFTR  provision  in  the  sense  that  the  Bank  of 
England  and  United  Kingdom  public  debt  management  bodies  are  exempted  from  the 
reporting  obligation  and  the  reuse  transparency  requirements.  Likewise,  the  draft 
statutory instrument contains a provision to extend this list in a manner comparable to the 
according SFTR provision. 

4.  CONCLUSIONS 

In  the  light  of  the  above,  the  draft  UK  domestic  legislative  framework  incorporating 
SFTR exempts the UK central bank and public bodies charged with or intervening in the 
management  of  public  debt  from  the  reporting  obligation  for  SFTs  and  the  reuse 
transparency requirements. The draft UK legislative framework also includes provisions 
which  enable  the  extension  of  the  exemption  to  the  central  banks  and  public  debt 
management bodies of foreign countries. 

1   Regulation  (EU)  No  2015/2365  of  the  European  Parliament  and  of  the  Council  on  transparency  of 

securities financing transactions and of reuse, OJ L 337, 23.12.2015, p. 1–34 

2   https://www.gov.uk/government/publications/draft-transparency-of-securities-financing-transactions-

and-of-reuse-amendment-eu-exit-regulations-2019 

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Adding  the  UK  central  bank  and  public  debt  management  bodies  to  the  list  of  entities 
exempted  from  the  reporting  obligation  and  the  reuse  transparency  requirements  under 
SFTR, will prevent  interference with  the conduct  of their monetary responsibilities and 
promote  a  level-playing  field  in  the  application  of  SFT  reforms  with  regard  to 
transactions  with  central  banks  across  jurisdictions.  This  will  also  contribute  to  greater 
international coherence and consistency. 

The  Commission  therefore  concludes  that  Article  2(2)  of  STFR  should  be  amended  to 
exempt  from  certain  SFTR  requirements  the  UK  central  bank  and  other  public  bodies 
charged with or intervening in the management of public debt.  

The comparative analysis in this report is not exhaustive. It is based on UK domestic law 
incorporating SFTR, parts of which are not yet fully adopted.  

The Commission will continue to review on a regular basis the international treatment of 
central  banks  and  public  bodies  as  regards  the  SFT  reporting  obligation  and  the  reuse 
transparency requirements in third countries, including in third countries listed in Article 
2(2) of SFTR. The list of exempted entities may be updated in light of the development 
of  the  regulatory  arrangements  in  third  countries  and  taking  into  account  any  relevant 
new  sources  of  information.  Such  reassessment  could  also  lead  to  removal  of  third 
countries from the list of exempted entities.  

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