A final joint report on the incentives to clear OTC derivatives has been published by the Financial Stability Board, the International Organization of Securities Commissions, the Basel Committee on Banking Supervision and the Committee on Payments and Market Infrastructures. The report is part of the FSB's post-implementation evaluation of the effects of the G20 financial regulatory reforms.
The report sets out the results of an evaluation of the reforms that have been implemented to incentivize central clearing of OTC derivatives and outlines areas for further consideration by the global standard setting bodies. The reforms considered include mandatory clearing requirements, capital, liquidity and margin requirements, as well as the reforms to CCP resilience, recovery and resolution.
The evaluation found that:
The following areas for further consideration are highlighted in the report:
The Basel Committee is consulting on targeted revision of the leverage ratio exposure measure, proposing two possible options: (i) a treatment that would allow amounts of cash and non-cash IM received from a client to offset the potential future exposure of derivatives centrally cleared on the client's behalf; and (ii) a treatment that would align the treatment of client-cleared derivatives with the measurement as determined per the standardized approach to measuring counterparty credit risk exposures for risk-based capital requirements. The consultation closes on January 16, 2019.
The report states that each standard setting body is responsible for deciding whether and how to amend a particular standard.
View the report.
View details of the consultation paper.
View details of the Basel Committee consultation on leverage ratio.