On January 25, 2017, the FSB published a Report on regulatory approaches to re-hypothecation of client assets. The Report is in response to the recommendation that the possibility of harmonizing client asset rules with regard to re-hypothecation should be examined as per Policy Recommendation 8 of the FSB's Policy Framework for Addressing Shadow Banking Risks in Securities Lending and Repos. The FSB's conclusion is that there is no immediate rationale for harmonizing regulatory approaches to re-hypothecation of client assets. The FSB encourages its member jurisdictions to implement the recommendation in the Policy Framework (Recommendation 7), which provides that authorities should ensure that regulations governing re-hypothecation of client assets should encompass three principles relating to sufficient disclosure to clients, use of client assets that may be re-hypothecated and limitations on the ability to re-hypothecate client assets.
The Report is available at: http://www.fsb.org/wp-content/uploads/Re-hypothecation-and-collateral-re-use.pdf ; and the FSB Policy Framework is available at: http://www.fsb.org/wp-content/uploads/r_130829b.pdf.
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