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ISLA MANIFESTO 2024
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Recommendations

Europe should take a consistent and pragmatic view across legal financial frameworks that may impact market
liquidity, both addressing regulatory conflicts and utilising consistent definitions and concepts across jurisdictions, to
mobilise and facilitate the growth of supply channels of securities across all investor groups. The ambition should be
to resolve those conflicts and develop a common approach within the EU towards securities lending and borrowing, The European Commission should continue to
facilitating its use among market participants, with clear and unambiguous rules and regulation. Stronger participation
of EU-based investors in securities lending will reduce the current reliance of non-EU based supply coming from propose legislation in the form of regulations
institutions outside of Europe and at the same time, increase the liquidity and competitiveness of EU markets. rather than directives, to improve consistency of

I Review the UCITS framework (EPM techniques) to improve consistency of interpretation of the implementation and interpretation, and agility in

Directive across EU Member States and remove regulatory obstacles to further facilitate the making changes 11
participation of funds in securities lending. This includes the consistent use of pledge mechanisms,
as an acceptable form of collateral arrangement.

II Ensure the upcoming EBA’s technical standards resulting from CRR do not unduly penalise banks

when engaging in securities lending and borrowing transactions with unrated entities such as UCITS
in particular.

III As part of the local implementation of the EU FASTER Directive, promote clear, unambiguous and

forward-looking legislation, including a harmonised EU-wide definition of beneficial ownership,
taking into account widely accepted international standards, such as the OECD guidelines and ensure
consistency of interpretation between Member States.

IV Considering the increased use of securities lending through online retail platforms, investor protection

efforts should include raising awareness and transparency about the benefits/risks of securities
lending.

V Provide explicit recognition of activities such as securities lending and borrowing within defined

legislation, such as the Sustainable Finance Disclosure Regulation (SFDR), whereby EU regulators
officially acknowledge that engagement in the activity, so long as it complies with an institution’s
overall responsible investment policy, does not negatively impact a firm’s overall sustainability
objective.

VI Ensure that the upcoming review of the PEPP framework enables and incentivises EU pension funds

to make more of their assets available for securities lending. Encourage additional Member States
to drive forward the consistent introduction of capital markets-based personal pension schemes, as
recently took place in Germany.

11 ESMA position paper ‘ Building more effective and attractive capital markets in the EU’ https://www.esma.europa.eu/sites/default/
files/2024-05/ESMA24-450544452-2130_Position_paper_Building_more_effective_and_attractive_capital_markets_in_the_EU.pdf