For LBMA, 2019 will bring a focus to regulation seeking to increase transparency and accountability to the financial markets.
Bullion Bank Reporting under the Conflict Minerals Regulation, the Global Precious Metals Code, the Net Stable Funding Ratio (NSFR) and the Securities Financing Transactions Regulation (SFTR) will be on our regulatory agenda throughout the year. To promote our work in these areas, LBMA will be circulating monthly updates to its membership.
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Net Stable Funding Ratio
Under the Basel III framework to be implemented in 2022, precious metals will require 85% of Required Stable Funding (RSF) as part of NSFR.
This means that 85% of liquid assets must be held against the commodity to achieve the RSF for precious metals financing, and clearing and settlement.
This could have a detrimental impact on the clearing and settlement services provided by LPMCL and also potentially increase the cost of financing and/or lead to market participants exiting the market.
Throughout 2018, LBMA together with LPMCL and the German Precious Metals Federation have been working with Norton Rose Fulbright LLP (NRFLLP) to advocate a lower RSF factor. In July, the European Parliament’s Committee on Economic and Monetary Affairs (ECON) adopted an amendment lowering the RSF to 50%. However, when put to Member States in November, this proposal was rejected by European Finance Ministers. Instead, the 85% RSF will go ahead for the financing, and the clearing and settlement of precious metals.
It was also decided that the European Banking Authority (EBA), through a liquidity assessment of the precious metals market, would examine whether a reduction or exemption of the RSF factor could be justified. LBMA, LPMCL and NRFLLP will engage with the EBA during its review. Using the LBMA-i trade reporting data, LBMA hopes to demonstrate the levels of liquidity and transparency within the precious metals market. The objective of any upcoming advocacy activities remains to secure a full exemption from the application of the RSF for precious metals clearing and settlement services, and financing transactions.
Sakhila Mirza, LBMA General Counsel and Executive Director of the LBMA Board works very closely with the CEO on the strategic development of the association, leading on a range of market development initiatives. She also takes responsibility for all the legal work affecting the Association, lobbying on matters affecting the market and building key relationships with governmental officials and regulators around the world.
She previously worked in the energy and commodities industry on compliance, legal and regulatory matters. She read law at the LSE and is a qualified solicitor.