Brokers face restrictions on using clients' assets as collateral for other trades, as part of a push by global regulators to prevent the securities lending market from sparking chain reactions that could cause a crisis.

Under recommendations published today by the Financial Stability Board (FSB), brokers wouldn't be allowed to tap client assets for their own trading, and they would have to provide “sufficient disclosure” of plans to use the securities as collateral in other transactions. They would also have to meet minimum standards in managing liquidity risks.

Regulators are seeking to rein in how traders use collateral in a bid to prevent any repeat of the turmoil that followed the 2008 collapse of Lehman Brothers Holdings Inc., which was driven in part by confusion over who was owed what on outstanding trades. The European Union may seek to curb the number of times a single asset can be passed on as collateral in trades, a person familiar with the plans said last week.