ISLA: A phenomenal pace of change sets the regulatory agenda
17 June 2026 Portugal
Image: GoDress/stock.adobe.com
The pace of legislative change over the past couple of months has been phenomenal across EMEA, the US, and APAC, noted speakers on the 鈥業SLA Global Advocacy, Regulatory & Legal Highlights鈥� session. It is not just regulation for regulation鈥檚 sake, the panel heard, the International 网爆吃瓜 Lending Association (ISLA) is looking to strategically tweak and target rules across all key jurisdictions to help with national competitiveness.
In developing markets, there is a huge focus on growth, such as within the Middle East and Latin America 鈥� both of which are working to modernise legislative frameworks and infrastructure to bring national rules in line with international standards.
According to the panel, ISLA has come a long way in terms of establishing new relationships with members of parliament, European Council attach茅s, and national regulators. As part of this, ISLA launched a dedicated Advocacy and Public Policy Committee to not only bring these representatives to support the association鈥檚 advocacy work but to help provide education to policymakers on securities lending, which is still considered a niche product.
At the heart of the panel鈥檚 discussion was the European Commission鈥檚 Market Integration and Supervision Package (MISP) 鈥� measures designed to remove barriers and unlock the full potential of the EU single market for financial services.
The MISP package is a 鈥渉uge piece of legislative change鈥� and incorporates revisions to 18 pieces of legislation across Europe. The package is split into three parts: a master directive, which amends UCITS, AIFMD, MiFID; a master regulation which touches on SFTR and CSDR; and a notion to change the settlement finality directive, in relation to the digital asset space, into a regulation which provides broad application across all EU member states.
Moving to the topic of digital, the association is in the early stages of structural change. The industry is already in discussion about the possibilities for tokenisation, DLT, and stablecoins, and coordination across the market is key.
MISP mentions a DLT pilot regime, where a working group will be set up and overseen by the European regulators with an aim to create a set of standards.
The panel highlighted that regulators are catching up. While the market has been discussing various different pilots for some time, and has moved from concept to some level of adoption, legal and regulatory certainty is required in order to build an ecosystem of digital.
Moving the panel forward, one panellist said SFTR has been one of the busiest areas for ISLA over the past five to six years. When first introduced, it was noted that this regulation was not fit for purpose, and the industry has been awaiting SFTR Refit for the last four years.
The current landscape is fragmented, said one panellist, who warned that a securities lending transaction may be reported under two different regulations. Evidence from ESMA showed that some firms are spending up to 鈧�5 million a year to maintain SFTR reporting. Other issues with SFTR relate to a lack of clarity and dual-sided reporting. A final report on SFTR Refit is to be released in July.
Another hot topic on the panel was Basel III. ISLA is in the midst of responding to the US Basel III re-proposals, which forms a new set of proposals following Basel III Endgame.
The association is putting forward a number of recommendations, including allowing firms to adopt and revise a collateral haircut approach immediately upon finalisation; revising the single counterparty credit limit framework; recognising that bankruptcy with collateral and repo-style transactions does not create counterparty credit risk (CCR) and should not attract a CCR charge; and improving the risk sensitivity of a collateral haircut approach. It was anticipated that the final rule would be available at the end of 2026.
With a busy regulatory agenda facing the market, opportunity knocks, and the market seems ready to take it.
In developing markets, there is a huge focus on growth, such as within the Middle East and Latin America 鈥� both of which are working to modernise legislative frameworks and infrastructure to bring national rules in line with international standards.
According to the panel, ISLA has come a long way in terms of establishing new relationships with members of parliament, European Council attach茅s, and national regulators. As part of this, ISLA launched a dedicated Advocacy and Public Policy Committee to not only bring these representatives to support the association鈥檚 advocacy work but to help provide education to policymakers on securities lending, which is still considered a niche product.
At the heart of the panel鈥檚 discussion was the European Commission鈥檚 Market Integration and Supervision Package (MISP) 鈥� measures designed to remove barriers and unlock the full potential of the EU single market for financial services.
The MISP package is a 鈥渉uge piece of legislative change鈥� and incorporates revisions to 18 pieces of legislation across Europe. The package is split into three parts: a master directive, which amends UCITS, AIFMD, MiFID; a master regulation which touches on SFTR and CSDR; and a notion to change the settlement finality directive, in relation to the digital asset space, into a regulation which provides broad application across all EU member states.
Moving to the topic of digital, the association is in the early stages of structural change. The industry is already in discussion about the possibilities for tokenisation, DLT, and stablecoins, and coordination across the market is key.
MISP mentions a DLT pilot regime, where a working group will be set up and overseen by the European regulators with an aim to create a set of standards.
The panel highlighted that regulators are catching up. While the market has been discussing various different pilots for some time, and has moved from concept to some level of adoption, legal and regulatory certainty is required in order to build an ecosystem of digital.
Moving the panel forward, one panellist said SFTR has been one of the busiest areas for ISLA over the past five to six years. When first introduced, it was noted that this regulation was not fit for purpose, and the industry has been awaiting SFTR Refit for the last four years.
The current landscape is fragmented, said one panellist, who warned that a securities lending transaction may be reported under two different regulations. Evidence from ESMA showed that some firms are spending up to 鈧�5 million a year to maintain SFTR reporting. Other issues with SFTR relate to a lack of clarity and dual-sided reporting. A final report on SFTR Refit is to be released in July.
Another hot topic on the panel was Basel III. ISLA is in the midst of responding to the US Basel III re-proposals, which forms a new set of proposals following Basel III Endgame.
The association is putting forward a number of recommendations, including allowing firms to adopt and revise a collateral haircut approach immediately upon finalisation; revising the single counterparty credit limit framework; recognising that bankruptcy with collateral and repo-style transactions does not create counterparty credit risk (CCR) and should not attract a CCR charge; and improving the risk sensitivity of a collateral haircut approach. It was anticipated that the final rule would be available at the end of 2026.
With a busy regulatory agenda facing the market, opportunity knocks, and the market seems ready to take it.
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