The leading knowledge platform for the financial technology industry
The leading knowledge platform for the financial technology industry

A-Team Insight Blogs

US Associations’ Tarp Survey Indicates Industry in Need of Price Transparency Guidelines

Originally appeared in MiFID Monitor

The industry needs more information about how the implementation of the US Troubled Asset Relief Program (Tarp) could be most effective, particularly in the areas of price transparency, according to a survey by five industry associations. The survey, which was sent to members of the Securities Industry and Financial Markets Association (Sifma), American Securitisation Forum (ASF), American Bankers Association (ABA), Mortgage Bankers Association (MBA) and Commercial Mortgage Securities Association (CMSA), highlights the industry’s reaction to the Tarp.

The survey was aimed at providing insights into how financial organisations have been assessing and evaluating potential Tarp participation. Tim Ryan, president and CEO of Sifma, explains: “The industry needed more granular, tangible information on how Tarp implementation could be most effective, and this survey provides that guidance to our industry and to policymakers. Given the breadth of the markets, this survey provides some meaningful direction on where regulators’ tools might be targeted to be most effective, particularly as it relates to providing price transparency.”

George Miller, executive director of the ASF, adds: “This survey will provide the industry and policymakers with information that will be useful in building a smart programme.”

According to the results of the survey, which garnered responses from 445 individuals, large firms are more likely to participate in Tarp, although it was generally agreed that most financial institutions would participate in the end. Institutions indicated they would sell approximately 50% of their assets targeted for Tarp at a slight discount to model-based valuations (or current book value if marked to market) but small institutions would require prices closer to cost.

Small institutions are more concerned about uncertainty over future realised losses and large institutions are concerned about illiquidity premium. In addition to commercial real estate, smaller institutions identified other real estate owned (OREO) and larger institutions identified corporate loans and collateralised debt obligations (CDOs) as having the greatest illiquidity premium and would be the most beneficial to their institutions if purchased by Tarp.

Respondents indicated that a lack of clarity regarding implementation, warrant provision, and uncertainty over shareholder perception of participation is significantly affecting their willingness to participate.

Related content

WEBINAR

Recorded Webinar: Managing the transaction reporting landscape post Brexit: MiFID II, SFTR, EMIR

The transaction reporting landscape has, for many financial institutions, expanded considerably in size since the end of the UK’s Brexit transition period on 31 December 2020 and the resulting need for double reporting of some transactions to both EU and UK authorities. It has also changed dramatically following the UK government’s failure to reach equivalence...

BLOG

The Deal is Done – LSEG Completes Acquisition of Refinitiv

A big day in the City last Friday as the London Stock Exchange Group (LSEG) completed its all-share acquisition of Refinitiv first mooted back in July 2019. The acquisition is expected to create a leading, UK-headquartered, global financial market infrastructure provider with a strong data and analytics business, significant capital market capabilities across multiple asset...

EVENT

RegTech Summit APAC Virtual

RegTech Summit APAC will explore the current regulatory environment in Asia Pacific, the impact of COVID on the RegTech industry and the extent to which the pandemic has acted a catalyst for RegTech adoption in financial markets.

GUIDE

Entity Data Management Handbook – Seventh Edition

Sourcing entity data and ensuring efficient and effective entity data management is a challenge for many financial institutions as volumes of data rise, more regulations require entity data in reporting, and the fight again financial crime is escalated by bad actors using increasingly sophisticated techniques to attack processes and systems. That said, based on best...