Committee on Payments and Market Infrastructures Board of the International Organization of Securities Commissions Assessment and review of application of Responsibilities for authorities November 2015 This publication is available on the BIS website (www.bis.org) and the IOSCO website (www.iosco.org). © Bank for International Settlements and International Organization of Securities Commissions 2015. All rights reserved. Brief excerpts may be reproduced or translated provided the source is stated. ISBN 978-92-9197-376-7 (online) Contents 1. Executive summary ......................................................................................................................................................... 1 1.1 Methodology ........................................................................................................................................................... 2 1.2 Key findings of the assessment ........................................................................................................................ 2 2. Introduction ...................................................................................................................................................................... 4 2.1 Broader context of the Responsibilities assessment ............................................................................... 4 2.2 Scope and objective of the Responsibilities assessment ....................................................................... 5 3. Methodology .................................................................................................................................................................... 6 3.1 Structure and process .......................................................................................................................................... 6 3.2 Ratings ....................................................................................................................................................................... 6 3.3 Key methodological issues................................................................................................................................. 8 4. Key observations from the Responsibilities assessment ............................................................................... 11 5. Next steps and follow-up .......................................................................................................................................... 19 Annex 1 – Summary table of Responsibilities assessment ratings .............................................................................. 20 Annex 2 – Responsibilities of central banks, market regulators, and other relevant authorities for financial market infrastructures ............................................................................................................................... 23 Annex 3 – Jurisdiction templates .............................................................................................................................................. 25 Annex 4 – Members of the CPMI-IOSCO Implementation Monitoring Standing Group (IMSG) and assessment teams ...................................................................................................................................................... 213 CPMI-IOSCO – Assessment and review of application of Responsibilities for authorities – November 2015 iii 1. Executive summary In April 2012, the Committee on Payments and Market Infrastructures (CPMI)1 and the International Organization of Securities Commissions (IOSCO) issued the Principles for financial market infrastructures (PFMI).2 In line with the G20’s expectations, CPMI and IOSCO members have committed to adopting the 24 principles (the Principles) and the five responsibilities for authorities (the Responsibilities) included in the PFMI across financial market infrastructure (FMI) types (ie payment systems (PSs), central counterparties (CCPs), central securities depositories (CSDs), securities settlement systems (SSSs), and trade repositories (TRs)). Following the publication of the PFMI, the CPMI and IOSCO agreed to monitor their implementation in 28 jurisdictions with authorities that are members of the Financial Stability Board (FSB) and/or the CPMI and/or the IOSCO.3 To this end, the CPMI-IOSCO Steering Group4 established a standing working-level group (the Implementation Monitoring Standing Group (IMSG)) to design, organise and carry out the implementation monitoring assessments.5 The implementation monitoring programme is being carried out at three levels: a Level 1 (L1) assessment of the status of the implementation process, a Level 2 (L2) assessment of the completeness of the implemented framework and its consistency with the PFMI, and a Level 3 (L3) assessment of the consistency in outcomes of such frameworks.6 While in the case of the Principles, L2 and L3 assessments have been done separately, the IMSG considered it more appropriate and efficient to carry out a combined L2 and L3 assessment of the Responsibilities. This report presents the findings of the IMSG’s assessment of the authorities’ implementation of the Responsibilities (the Responsibilities assessment), across all FMI types, in the 28 jurisdictions. The work on the Responsibilities was carried out as a peer review during 2015, based on the status of the implementation measures as at 9 January 2015. Accordingly, assessment ratings for each jurisdiction reflect the implementation measures in place as at 9 January; other measures that were introduced after this date, or other material developments, are noted where relevant but were not considered when assigning ratings of observance. 1 The Committee on Payment and Settlement Systems (CPSS) changed its name to the Committee on Payments and Market Infrastructures (CPMI) on 1 September 2014. Please note that references to reports published before that date use the Committee’s old name. 2 The April 2012 CPSS-IOSCO Principles for financial market infrastructures can be found on the BIS website at www.bis.org/publ/cpss101.htm and on the IOSCO website at www.iosco.org/library/pubdocs/pdf/IOSCOPD377.pdf. 3 The 28 jurisdictions that are participating in the PFMI implementation monitoring exercise are: Argentina, Australia, Belgium, Brazil, Canada, Chile, China, the European Union, France, Germany, Hong Kong SAR, India, Indonesia, Italy, Japan, Korea, Mexico, the Netherlands, Russia, Saudi Arabia, Singapore, South Africa, Spain, Sweden, Switzerland, Turkey, the United Kingdom and the United States. 4 The Steering Group comprises a subset of the members of the CPMI and the IOSCO Board, and is responsible for providing operational guidance on behalf of the parent committees on joint CPMI-IOSCO work. 5 The IMSG comprises representatives from 18 jurisdictions that reflect a balance of CPMI and IOSCO members and geographical dispersion, as well as a range of domestic and global FMIs’ supervisors and overseers. 6 To date, the IMSG has completed L1 assessments of all 28 jurisdictions’ implementation of both the Principles and the Responsibilities, across all FMI types, as well as L2 assessments of the implementation of the Principles in respect of CCPs and TRs in the European Union, Japan and the United States. The CPMI and IOSCO recently announced the commencement of the first L3 assessment of the implementation of the Principles; this review will focus on a subset of requirements under the PFMI that relate to financial risk management by CCPs, including certain practices related to governance, stress testing, margin, liquidity, collateral and recovery. This first review will consider outcomes achieved in this area by examining a number of globally and locally active CCPs that clear derivative products (both exchange-traded and over-the-counter (OTC)). More information is available at www.bis.org/cpmi/info_mios.htm?m=3%7C16%7C599. CPMI-IOSCO – Assessment and review of application of Responsibilities for authorities – November 2015 1 It should be noted that no specific recommendations have been issued in this report to jurisdictions in which gaps have been identified. CPMI-IOSCO nevertheless expects that jurisdictions will implement any necessary measures as soon as appropriate in order to achieve full observance. 1.1 Methodology The IMSG’s approach to the Responsibilities assessment was based on the Principles for financial market infrastructures: Disclosure framework and assessment methodology (AM). In particular, the survey questions on implementation measures were drawn from the AM. Additionally, the rating scale applied was taken from the AM with some modifications to allow for cases in which implementation measures with respect to the regime for TRs were still under development and therefore deemed “Not ready for assessment”. During the assessment, the IMSG had to exercise judgment in some areas to ensure consistency in the approach taken across jurisdictions and FMI types. For instance, in assessing Responsibility D, which states that jurisdictions should adopt the Principles and apply them consistently, the IMSG took the decision to base such ratings on self-assessments by the relevant jurisdictions, as reflected in the second update of the L1 assessment.7 In assessing Responsibility E – on cooperation with other authorities – the IMSG found that, while some jurisdictions were able to provide evidence on the effectiveness of their cross-border cooperative arrangements across all FMI types, many cross-border