31.07.2012
By Simon Miller
The Committee on Payment and Settlement Systems (CPSS) and the International Organisation of Securities Commissions (IOSCO) have published a consultation on the recovery and resolution of financial market infrastructures (FMIs).
With FMIs playing an essential role in the global financial system, the disorderly failure of an FMI could lead to severe systemic disruption if it causes markets to cease to operate effectively. Accordingly, all types of FMIs should generally be subject to regimes and strategies for recovery and resolution, according to the organisations.
As a result, the consultation aims to outline the issues that should be taken into account for different types of FMIs when putting in place effective recovery plans and resolution regimes that are consistent with the CPSS-IOSCO Principles for financial market infrastructures that were published in April 2012.
The principles require that FMIs have effective strategies, rules and procedures to enable them to recover from financial stresses.
Paul Tucker, deputy governor, Financial Stability of the Bank of England and CPSS chairman commented: “The vital role of the financial system’s infrastructure makes it essential that credible recovery plans and resolution regimes exist. FMIs need to be a source of strength and continuity for the financial markets they serve.”
“This is even more important as a safeguard given the commitment made by G20 Leaders in 2009 that all standardised OTC derivatives should be cleared through central counterparties,” added Masamichi Kono, vice-commissioner for International Affairs, Financial Services Agency, Japan and chairman of the IOSCO Board.
Amongst its conclusions, the report states that the Key Attributes will provide a framework for resolution of FMIs under a statutory resolution regime.
Published alongside the report is a cover note that lists the specific issues on which the committees seek comments during the public consultation period.
The report is available here and comments on the report are invited from all interested parties and should be sent by 28 September 2012.
After the consultation period, CPSS-IOSCO will report on how the methodology for assessing compliance with the Key Attributes, currently being prepared by the Financial Stability Board, should be revised to reflect FMI-specific elements taking into account the conclusions of this report and the comments received.
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