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August 07, 2018

FSB, BCBS, CPMI, and IOSCO published a consultative document that examines the effects of G20 financial regulatory reforms on the incentives to centrally clear over-the-counter (OTC) derivatives. The document evaluates how these reforms interact and how they could affect incentives. The consultation closes on September 07, 2018.

The analysis suggests that, overall, the reforms are achieving their goals of promoting central clearing, especially for the most systemic market participants. This is consistent with the goal of reducing complexity and improving transparency and standardization in the OTC derivatives markets. Beyond the systemic core of the derivatives network of CCPs, dealers/clearing service providers and larger, more active clients, the incentives are less strong. Also, analysis of quantitative and qualitative survey data and market outreach suggest that the treatment of initial margin in the leverage ratio can be a disincentive for banks to offer or expand client clearing services. Considering the original objectives of the reform, additional analysis would be useful to further assess these effects.

This is the second evaluation under the FSB framework for the post-implementation evaluation of the effects of G20 financial regulatory reforms. The report identifies reform areas that may merit consideration by the relevant standard-setting bodies. The findings from the report will inform relevant standard-setting bodies about any subsequent policy efforts and potential adjustments, keeping in mind the original objectives of the reforms. The final responsibility for deciding whether and how to amend a particular standard or policy remains with the body that is responsible for issuing that standard or policy. 


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Comment Due Date: September 07, 2018

Keywords: International, Banking, Securities, OTC Derivatives, Central Clearing, Regulatory Reforms, FSB/BCBS/CPMI/IOSCO

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