Cooperation Among Authorities Case Study - CLS Oversight Committee

Transcription

1 Cooperation Among Authorities Case Study - CLS Oversight Committee Payment System Policy and Oversight Course May 17, 2016

2 Important Note The views expressed in this presentation do not necessarily reflect the views of the Federal Reserve Bank of New York or any other component of the Federal Reserve System. 2

3 Historical Context for Cooperation Cooperation among central banks internationally has been a long standing practice The principles that guide cooperative oversight were introduced in 1990 Report of the Committee on Interbank Netting Schemes of the central banks of the Group of Ten countries (the Lamfalussy Report) Subsequent reports and publications provided further clarity and updates to the existing principles The CPSS Report on Central bank oversight of payment and settlement systems, published in May 2005, included Principles for International Cooperative Oversight In April 2012 CPSS-IOSCO published the Principles for Financial Market Infrastructures (PFMI) Responsibility E: All relevant authorities should cooperate with each other, both domestically and internationally, in promoting the safety and efficiency of FMIs 3

4 Growing Need for Cooperation Mandatory clearing of OTC derivatives Increasing cross-border use by financial institutions of certain key FMIs Increasing cross-border operations of certain FMI groups FMIs becoming systemically important in multiple jurisdictions, leading to growing interest among a broader set of authorities Recognition of cooperative oversight as an important tool and expectations that arrangements be formed The Financial Stability Board (FSB) identified cooperative oversight as one of its four safeguards for a resilient and efficient global framework for central clearing CPSS and IOSCO established cooperation among relevant authorities as a specific responsibility in the Principles for Financial Market Infrastructures (PFMI) 4

5 Examples of Cooperation Cooperation may take a variety of forms and is often tailored to the Financial Market Infrastructure being overseen 5

6 Examples of Cooperation Experience has proved the benefits of formal, structured oversight arrangements Provides a mechanism for relevant authorities to support each other in fulfilling their respective mandates Fosters the assessment of the FMI against relevant and consistent principles Avoids gaps, duplication, and inconsistent oversight Fosters communication and consultation in normal circumstances and during times of stress Examples of formal, multilateral arrangements SWIFT CLS LCH Clearnet Ltd. ICE ClearEurope 6

7 Case Study: CLS Oversight Committee Background CLS provides a PvP mechanism for settling FX transactions in 18 currencies Rationale/need for cooperative oversight arrangement Global systemic importance Scale of daily activity Cross-border, multicurrency settlements Interdependencies Each central banks whose currency settles in CLS provides CLS with an account and access to their RTGS system Members include large, international financial institutions 7

8 CLS Oversight Committee - Overview Central banks developed a Protocol in November 2008 for a dedicated cooperative oversight arrangement for CLS Established under the principles for international cooperative oversight Oversight of CLS previously under the CPSS FX Subgroup Provides a mechanism for central banks to fulfill their responsibilities to promote safety, efficiency, and stability in the local markets and payment systems in which CLS participates Establishes a Crisis Communication Framework 8

9 CLS Oversight Committee - Objectives Based on principles for cooperative oversight, overseeing central banks seek to: Promote a consistent oversight approach Achieve comprehensive oversight of overall system Avoid duplication of efforts Minimize burden on CLS Foster consistent and transparent communication with CLS Ensure observance of applicable rules, regulations and central bank policies The PFMI serve as minimum standards against which CLS is assessed by the participating central banks 9

10 CLS Oversight Committee Organization The Federal Reserve Board, as the chartering authority and supervisor of CLS, has primary responsibility for the oversight of CLS FRBNY provides the Chair and Secretariat Chairperson is appointed by the Chairman of the Board of Governors Each central bank designates one responsible senior official (RSO) to ensure ongoing senior-level engagement and accountability for oversight matters Each RSO can name one or more designees to serve as the technical experts on CLS matters OC meets regularly and includes engagements with the FR supervisors and CLS representatives 10

11 CLS Oversight Committee Roles & Responsibilities Key Activities of the OC Assess the overall system against international standards Review proposed material changes to CLS s activities, rules, or risk controls Consult on individual central bank policy or action that can have a material impact on CLS Distinct responsibilities of supervisors and overseers, however, there is overlap in their interests Inform and support each other through coordination and communication Oversight arrangement leverages the FR supervisory process for CLS 11