FSB published the results of a peer review on the implementation of over-the-counter (OTC) derivatives market reforms in Indonesia. The report examines steps the authorities have taken to implement OTC derivatives market reforms in Indonesia, including by following up on the relevant G20 commitments. The review finds that the authorities in Indonesia have made some progress in implementing the OTC derivatives reforms, with focus on developing their domestic derivatives market. The report also provides recommendations for Indonesian authorities to address issues in the implementation of OTC derivatives reforms.
The report highlights that OTC derivatives market in Indonesia has been steadily growing over the past five years, though it is relatively small, both compared to its economy and from a global perspective. Foreign-exchange derivatives are, by far, the largest OTC derivatives class, followed by interest rate and commodity derivatives. Reporting requirements have been in place for banks’ OTC foreign exchange and interest rate derivatives transactions as well as for other participants’ commodity derivatives transactions for many years. Domestic banks, including local subsidiaries of foreign banking groups and local branches of foreign banks, are the most active market participants. Progress continues on central clearing requirements and margin requirements for non-centrally cleared derivatives and the authorities are appropriately prioritizing these areas over establishing platform trading. The report notes the authorities’ continued progress on these reforms, despite pressures in the wake of the COVID-19 pandemic. Nevertheless, the review includes following recommendations for Indonesian authorities:
- Improving the reporting, use, and public transparency of OTC derivatives data. The authorities should continue to improve reporting and use of OTC derivatives data by finalizing their review of trade repository infrastructure and reporting requirements and implementing improvements identified in the review; another recommendation entails introducing a timeline for adopting unique global identifiers for entities, transactions, and products.
- Addressing legal uncertainties regarding netting. The authorities should address legal uncertainties related to netting for derivatives transactions in bankruptcy, to facilitate effective central clearing and margin requirements.
- Implementing the remaining OTC derivatives reforms sequentially. The authorities should implement remaining OTC derivatives reforms in an appropriately sequenced manner by adopting central clearing of standardized OTC derivatives, margin requirements for non-centrally cleared derivatives, and capital requirements for exposures to central counterparties.
Keywords: Asia Pacific, Indonesia, Banking, Securities, Peer Review, OTC Derivatives, Reporting, Margin Requirements, Netting Regulations, Basel, FSB
Previous ArticleFED Finalizes Guidance on Board Effectiveness at Large Banks
The European Central Bank (ECB) is undertaking the integrated reporting framework (IReF) project to integrate statistical requirements for banks into a standardized reporting framework that would be applicable across the euro area and adopted by authorities in other EU member states.
The Basel Committee on Banking Supervision met, shortly after a gathering of the Group of Central Bank Governors and Heads of Supervision (GHOS), the oversight body of BCBS.
The International Organization of Securities Commissions (IOSCO) welcomed the work of the international audit and assurance standard setters—the International Auditing and Assurance Standards Board (IAASB)
The European Banking Authority (EBA) has been awarded the top European Standard for its environmental performance under the European Eco-Management and Audit Scheme (EMAS).
The Bank of England (BoE) published a Statistical Notice (2022/18), which informs that due to the Bank Holiday granted for Her Majesty Queen Elizabeth II’s State Funeral on Monday September 19, 2022.
The French Prudential Control and Resolution Authority (ACPR) announced that the European Banking Authority (EBA) has updated its filing rules and the implementation dates for certain modules of the EBA reporting framework 3.2.
The Australian Prudential Regulation Authority (APRA) announced reduction in the aggregate Committed Liquidity Facility (CLF) for authorized deposit-taking entities to ~USD 33 billion on September 01, 2022.
The China Banking and Insurance Regulatory Commission (CBIRC) published the administrative measures for internal control of wealth management companies, which come into force on the day of promulgation.
The Prudential Regulation Authority (PRA) proposed its approach to policy-making as it takes on wider rulemaking responsibilities under the Financial Services and Markets Bill.
The European Central Bank (ECB) published its opinion on the proposal for a regulation on harmonized rules on fair access to and use of data (Data Act).