Monday, April 16, 2012

CPSS, IOSCO Issue Final Report on Principles for Financial Market Infrastructures

The Committee on Payment and Settlement Systems (CPSS) and the Technical Committee of the International Organization of Securities Commissions (IOSCO) published their final report on the Principles for Financial Market Infrastructures. The report updates, harmonizes, and strengthens the risk management and related standards applicable to financial market infrastructures (FMIs), including systemically important payment systems, central securities depositories, securities settlement systems, central counterparties, and trade repositories. CPSS and IOSCO also released for comment the Disclosure Framework for Financial Market Infrastructures (Disclosure Framework) and the Assessment Methodology for the Principles for FMIs and the Responsibilities of Authorities (Assessment Methodology).

The final report replaces the standards previously published by CPSS and CPSS-IOSCO in the Core Principles for Systemically Important Payment Systems, Recommendations for Securities Settlement Systems, and Recommendations for Central Counterparties. CPSS and IOSCO expect the principles in the final report to play an important role in the regulation of FMIs around the world. The report supports the initiatives of the Group of Twenty Finance Ministers and Central Bank Governors (G-20) and the Financial Stability Board to strengthen core financial infrastructures and markets.

The new standards are designed to make FMIs more resilient to financial crises and, in particular, participant defaults. The report also includes revised responsibilities of relevant authorities in regulating, supervising and overseeing FMIs. CPSS and IOSCO members will strive to adopt the new standards by the end of 2012 and put them into effect as soon as possible. FMIs are expected to observe the standards as soon as possible.

CPSS and IOSCO also released for comment the Disclosure Framework and the Assessment Methodology. The Board of Governors of the Federal Reserve System, as a member of CPSS, and the Commodity Futures Trading Commission and the Securities and Exchange Commission, as members of IOSCO, encourage interested persons to review and comment on the consultative documents. The deadline for submitting comments on both documents to CPSS and IOSCO is June 15, 2012. Comments should be sent to both the CPSS secretariat and the IOSCO secretariat. The comments will be published on the websites of the Bank for International Settlements and IOSCO unless commentators request otherwise. After the consultation period, the CPSS and IOSCO will review the comments received and publish final versions of the two documents later in 2012.

The Disclosure Framework outlines basic information that FMIs should disclose to increase transparency of their governance, risk management, and operations in order to inform participants, authorities, and the public and to facilitate comparisons across FMIs. Under Principle 23 of the Principles for Financial Market Infrastructures, FMIs would be required to complete the Disclosure Framework and disclose their answers publicly on a regular basis.

The Assessment Methodology provides guidance for assessing and monitoring observance of the principles. It is primarily intended for external assessors at the international level. It also provides a baseline for national authorities to assess FMIs under their oversight or supervision.