The Financial Stability Board (FSB) published today a report by the FSB Chairman to the G20 Leaders summarising progress in over-the-counter (OTC) derivatives reforms, together with the sixth of the FSB's semi-annual comprehensive progress reports on implementation of OTC derivatives market reforms.
G20 Leaders agreed in 2009 to a comprehensive reform agenda to improve transparency in these markets, mitigate systemic risk, and protect against market abuse.
To achieve these objectives, the G20 agreed that by end-2012:
- all OTC derivatives contracts should be reported to trade repositories (TRs);
- all standardised contracts should be traded on exchanges or electronic trading platforms, where appropriate, and cleared through central counterparties (CCPs);
- non-centrally cleared contracts should be subject to higher capital requirements and minimum margining requirements should be developed.
These reports find that substantial progress has been made standard-setting bodies, national and regional authorities and market participants toward meeting the G20 commitments, through international policy development, adoption of legislation and regulation, and expansion of infrastructure.
- Jurisdictions' implementation of reforms: By the start of 2014 three-quarters of FSB member jurisdictions intend to have legislation and regulation adopted to require transactions to be reported to trade repositories. Frameworks for central clearing requirements are in place in most of the largest derivatives markets, with concrete rules now starting to go into effect.
- International standards: minimum standards are in place for sound risk management of Financial Market Infrastructures (FMIs), including CCPs, supporting OTC derivatives markets. Guidance on FMI recovery and resolution has been proposed, to avoid a situation in which these institutions would otherwise be 'too big to fail'. Standards for margin requirements and capital requirements related to non-centrally cleared transactions have been agreed or proposed, which once implemented will promote sound risk management and encourage use of central clearing.
- A group of regulators from a number of large OTC derivatives markets have reached understandings to improve the cross-border implementation of OTC derivatives reforms.
- A macroeconomic assessment estimates long-run net benefits from the reforms.
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