Committee on Payments and Market Infrastructures. Board of the International Organization of Securities Commissions

Transcription

1 Committee on Payments and Market Infrastructures Board of the International Organization of Securities Commissions Implementation monitoring of PFMI: Level 2 assessment report for Singapore July 2017

2 This publication is available on the BIS website ( and the IOSCO website ( Bank for International Settlements and International Organization of Securities Commissions All rights reserved. Brief excerpts may be reproduced or translated provided the source is stated. ISBN (online)

3 Contents 1. Executive summary Legal and regulatory framework Key findings of the assessment Summary response from the assessed jurisdiction s authorities Introduction Broader context of the Level 2 assessment Objective and rating Scope Process Overview of the regulatory, supervisory and oversight framework Payment systems Central counterparties and securities settlement systems Central securities depositories Trade repositories Assessment and recommendations Summary assessment of completeness and consistency with the Principles Singapore s completeness and consistency with the Principles Review and recommendations Annex A: List of abbreviations Annex B: Reference documents Annex C: FMIs in Singapore subject to the Principles CPMI-IOSCO Implementation monitoring of PFMI: Level 2 assessment report July 2017 iii

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5 1. Executive summary In April 2012, the Committee on Payments and Market Infrastructures (CPMI 1 ) and the International Organization of Securities Commissions (IOSCO) issued the Principles for financial market infrastructures (PFMI). 2 The principles within the PFMI (the Principles) set expectations for the design and operation of key financial market infrastructures (FMIs) to enhance their safety and efficiency and, more broadly, to limit systemic risk and foster transparency and financial stability. The Principles apply to all systemically important payment systems (PSs), central securities depositories (CSDs), securities settlement systems (s), central counterparties (CCPs) and trade repositories (TRs) (collectively FMIs). These FMIs collectively clear, settle and record transactions in financial markets. In line with the G20 s expectations, CPMI and IOSCO members have committed to implement and apply the PFMI in their respective jurisdictions. Following the publication of the PFMI, the CPMI and IOSCO agreed to monitor the implementation of the PFMI in 28 jurisdictions that are members of the Financial Stability Board (FSB), the CPMI or IOSCO. 3 To this end, the CPMI-IOSCO Steering Group 4 established a standing workinglevel group (the Implementation Monitoring Standing Group (IMSG)) to design, organise and carry out the implementation monitoring assessments. 5 The implementation monitoring programme is proceeding at three levels: a Level 1 assessment of the status of the implementation process; a Level 2 assessment of the completeness of the implemented framework and its consistency with the PFMI; and a Level 3 assessment of the consistency in outcomes of such frameworks. 6 While, in the case of the Principles, Level 2 and Level 3 1 The Committee on Payment and Settlement Systems (CPSS) changed its name to the Committee on Payments and Market Infrastructures (CPMI) on 1 September Please note that references to reports published before that date use the Committee s old name. 2 The CPSS-IOSCO Principles for financial market infrastructures (April 2012) can be found on the websites of the BIS at and International Organization of Securities Commissions (IOSCO) at 3 The 28 jurisdictions participating in the PFMI implementation monitoring exercise are Argentina, Australia, Belgium, Brazil, Canada, Chile, China, the European Union, France, Germany, Hong Kong SAR, India, Indonesia, Italy, Japan, Korea, Mexico, the Netherlands, Russia, Saudi Arabia, Singapore, South Africa, Spain, Sweden, Switzerland, Turkey, the United Kingdom and the United States. 4 The Steering Group comprises a subset of the members of the CPMI and the IOSCO Board, and is responsible for providing operational guidance on behalf of the parent committees on joint CPMI-IOSCO work. 5 The IMSG comprises representatives from a subset of the Steering Group member jurisdictions that reflect a balance of CPMI and IOSCO members and geographical dispersion, as well as a range of supervisors/overseers of domestic and global FMIs. 6 To date, the IMSG has completed Level 1 assessments of all 28 jurisdictions implementation of both the Principles and the responsibilities for authorities (the Responsibilities), across all FMI types, as well as Level 2 assessments of the implementation of the Principles in respect of CCPs and TRs in the European Union, Japan and the United States, and in respect of all FMI types in Australia and Hong Kong SAR. The CPMI and IOSCO have also conducted the first Level 3 assessment of the implementation of the Principles; this review focused on a subset of Principles in the PFMI that relate to financial risk management and recovery practices by CCPs, including certain practices related to governance of risk management, credit risk management, liquidity risk management, margin, collateral policy and investments and default management and recovery planning. This first review considered outcomes achieved in this area by examining a number of globally and locally active CCPs that clear derivative products (both exchange-traded and over-the-counter (OTC)). More information is available at CPMI-IOSCO Implementation monitoring of PFMI: Level 2 assessment report July

6 assessments have proceeded separately, in the case of the Responsibilities the IMSG considered it more appropriate and more efficient to carry out a combined Level 2 and Level 3 assessment. 7 This report presents the CPMI and IOSCO conclusions of a Level 2 assessment of whether, and to what degree, the content of the legal, regulatory and oversight frameworks, including rules and regulations, any relevant policy statements, or other forms of implementation applied to systemically important payment systems, CSDs/s, CCPs and TRs in Singapore, are complete and consistent with the Principles. It is concluded that the legal, regulatory and oversight frameworks in Singapore are complete and consistent with the Principles with the one exception of Principle 24 for TRs. However, it should be noted that Level 2 assessments do not evaluate whether FMIs are in observance with these measures, nor does it assess the effectiveness of the application of the legal and regulatory or oversight framework to FMIs by authorities (for example, through supervisory practices). The work on the Level 2 assessment was carried out as a peer review from August 2016 to May The assessment reflects the status of the Singaporean legal, regulatory and oversight framework as of 15 July Accordingly, assessment ratings reflect the implementation measures in place as of 15 July; other measures that were introduced after this date, or other material developments, are noted where relevant but were not considered in assigning ratings of consistency. 1.1 Legal and regulatory framework The Monetary Authority of Singapore (MAS) is the sole authority that is responsible for regulation, supervision and oversight of FMIs in Singapore. MAS regulatory role and powers for PSs are set out in the Payment Systems (Oversight) Act (PS(O)A). 8 For the PS that are owned and operated by MAS, MAS issued a policy statement Standards for MAS-Operated Financial Market Infrastructure (Standards for MAS-) 9 to hold itself to minimum standards set out in the PFMI. MAS regulatory role and powers for CCPs, CSDs, s and TRs are set out in the Securities and Futures Act, Cap 289 (SFA). 10 Pursuant to the relevant parts of the SFA, MAS has issued regulations 11 and notices 12 setting out further obligations. The Standards for MAS- apply to a CSD/ owned and operated by MAS. Further, MAS issued a general policy statement Monograph on Supervision of Financial Market Infrastructures in Singapore (Monograph) 13 that describes MAS approach to supervising FMIs in 7 CPMI-IOSCO, Assessment and review of application of Responsibilities for authorities, November 2015, 8 Payment Systems (Oversight) Act (PS(O)A) - statutes.agc.gov.sg/aol/search/display/view.w3p;page=0;query=docid%3a c6-4ca2-aba3-324d8ad824c1%20depth%3a0%20status%3ainforce;rec=0 9 Standards for MAS-Operated Financial Market Infrastructures - nsing/payment%20and%20settlement%20systems/standards%20for%20masoperated%20fmis.pdf 10 Securities and Futures Act, Cap 289 (SFA) - statutes.agc.gov.sg/aol/search/display/view.w3p;page=0;query=docid%3a25de2ec3-ac8e-44bf-9c88-927bf7eca056%20depth%3a0%20status%3ainforce;rec=0;whole=yes 11 Regulations are subsidiary legislation to the SFA and are intended to be a more granular application of powers conferred by the main Act. 12 Notices are directions that impose legally binding requirements on a specified class of financial institutions or persons. 13 Monograph on Supervision of Financial Market Infrastructures in Singapore, January 2013 (revised in January 2015) CPMI-IOSCO Implementation monitoring of PFMI: Level 2 assessment report July 2017

7 Singapore. Notably, the Monograph states that MAS adopts the standards set out in the PFMI when carrying out its supervision of FMIs, and that all systemically important PSs, CSDs, s, CCPs and TRs in Singapore are expected to comply with the PFMI. 1.2 Key findings of the assessment Payment systems The Assessment Team (AT) concluded that all the Principles have been implemented in a complete and consistent manner through the Standards for MAS- and the Monograph. Central counterparties The AT concluded that all the Principles have been implemented in a complete and consistent manner through the SFA, the regulations and notices issued by MAS under the SFA, and the Monograph. Securities settlement systems The AT concluded that all the Principles have been implemented in a complete and consistent manner through the SFA, the regulations and notices issued by MAS under the SFA, the Standards for MAS-, and the Monograph. Central securities depositories The AT concluded that all the Principles have been implemented in a complete and consistent manner through the SFA, the regulations and notices issued by MAS under the SFA, the Standards for MAS-, and the Monograph. Trade repositories The AT concluded that all the Principles, except for Principle 24, have been implemented in a complete and consistent manner through the SFA, the regulations and notices issued by MAS under the SFA, and the Monograph. The AT observed some gaps between the regulatory framework in Singapore and Principle 24 (disclosure of market data by trade repositories) as elaborated in Section FMIs owned and operated by MAS In Singapore, MAS operates the New MAS Electronic Payment and Book-Entry System (MEPS+) which is both a PS and a CSD/. MEPS+ consists of two sub-systems, namely MEPS+ Interbank Funds Transfer (MEPS+ IFT) for the settlement of large value Singapore dollars interbank funds transfers, and MEPS+ Singapore Government Securities (MEPS+ SGS) for the custody and settlement of scripless SGS and MAS Bills transactions. As stated in the Standards for MAS-, some elements or key considerations of the Principles are not applied to or are applied differently to the FMIs owned and operated by MAS. This approach is consistent with paragraph 1.23 of the PFMI as elaborated in the CPMI-IOSCO guidance note Application of the Principles for financial market infrastructures to central bank FMIs (CPMI-IOSCO CBFMI guidance). 14 Accordingly, the Principles applied to the central bank owned and operated FMIs in Singapore, within the context of this Report, have been evaluated to be consistent with the PFMI. 14 The CBFMI guidance explains how the PFMI applies to FMIs that are owned and operated by central banks, expanding on paragraph 1.23 of the PFMI, and further clarifies the interaction between the PFMI and central bank policies. CPMI-IOSCO Implementation monitoring of PFMI: Level 2 assessment report July

8 1.3 Summary response from the assessed jurisdiction s authorities MAS appreciates the AT s hard work and detailed evaluation and will consider the recommendations of the AT in future improvements to our regulatory and supervisory framework. MAS has taken extensive steps to implement the PFMI throughout our regulatory and supervisory framework, including legislative instruments, policy statements, supervision and direct engagement with the FMIs. In some cases, MAS implementation of the PFMI through legislative instruments involved the use of language differing from the PFMI for the purposes of facilitating supervisory implementation and consistency with Singapore s legislative drafting convention. MAS welcomes the AT s assessment that all the Principles have been implemented in a complete and consistent manner across FMI types (payment systems, central counterparties, securities settlement systems and central securities depositories), affirming the complementary nature of MAS legislative instruments within the broader regulatory and supervisory framework applied by MAS to FMIs. In respect of trade repositories, the AT identified a gap in respect of public disclosure of TR data, noting that MAS is actively considering appropriate requirements for the publishing of data in a manner that will help to achieve the objectives of public disclosure. MAS affirms our intent to ensure the provision of representative and informative disclosure to the market, taking into account data cleanliness, in line with the intent of the PFMI. 4 CPMI-IOSCO Implementation monitoring of PFMI: Level 2 assessment report July 2017

9 2. Introduction This report presents the CPMI and IOSCO conclusions of the Level 2 assessment of the Principles across all FMI types in Singapore. The assessment reflects the status of the Singaporean legal, regulatory and oversight framework as of 15 July This assessment was conducted as a peer review from August 2016 to May Accordingly, assessment ratings reflect the implementation measures in place as of 15 July 2016; other measures that were introduced after this date, or other material developments, are noted where relevant but were not considered in assigning ratings of consistency. This assessment is part of the effort to conduct Level 2 assessments of the legal, regulatory and oversight frameworks implementing the Principles for all FMI types in the 28 jurisdictions participating in the PFMI implementation monitoring exercise. For practical reasons, the Level 2 assessments are being carried out sequentially for groups of jurisdictions which have reported that final implementation measures for the Principles are in force, corresponding to the maximum rating in the Level 1 assessments. 16 The counterpart for the assessment was the Monetary Authority of Singapore (MAS), as it is the sole authority responsible for the regulation, supervision and oversight of FMIs in Singapore. 2.1 Broader context of the Level 2 assessment In line with the G20 s expectations, CPMI and IOSCO members have undertaken to incorporate the Principles and the Responsibilities included in the PFMI in their legal and regulatory frameworks. The CPMI and IOSCO regard full, timely and consistent implementation of the PFMI as fundamental to ensuring the safety and soundness of FMIs, avoiding regulatory arbitrage, and supporting the resilience of the global financial system. To that end, the CPMI and IOSCO have been actively monitoring the implementation of the PFMI based on a monitoring framework that involves assessment at three levels: (1) Level 1, to assess whether jurisdictions have completed the process of adopting the legislation, regulations and other policies that will enable them to implement the Principles and Responsibilities; (2) Level 2, to assess whether the content of legislation, regulations and policies (the regulatory framework) is complete and consistent with the Principles and the Responsibilities; and (3) Level 3, to assess whether there is consistency in the outcomes of implementation of the Principles and Responsibilities. The Level 1 exercise covered jurisdictions adoption of both the Principles and Responsibilities, across all FMI types, and was based on a self-assessment by the jurisdictions. The Level 2 and Level 3 assessments of the Principles and the Responsibilities, by contrast, have been conducted as peer reviews across jurisdictions and in much greater detail. 15 The CPMI and IOSCO thank the Assessment Team, which was led by Klaus Löber (European Central Bank) with the participation of Robert Hofmeister (European Central Bank), Kazunari Mochizuki (Japan Financial Services Agency), Veronica Fucile (Bank of Italy), Min-Kun Son (Bank of Korea), Anne Polaski (Commodity Futures Trading Commission) and Edward Kocis (Federal Reserve Board) as well as Mario Griffiths (CPMI Secretariat), Takeshi Shirakami (CPMI Secretariat) and Manabu Kishimoto (IOSCO Secretariat) as supporting members. 16 CPMI-IOSCO, Implementation monitoring of PFMI: Third update to Level 1 assessment report, June 2016, CPMI-IOSCO Implementation monitoring of PFMI: Level 2 assessment report July

10 The Principles assessments are ongoing, and are being considered separately at Level 2 and Level 3. For the Responsibilities, the IMSG combined the Level 2 and Level 3 assessments into a single exercise. The IMSG focused therefore on both the measures taken by the relevant authority to fulfil the Responsibilities, including its powers and the framework and processes in place to meet the requirements under the Responsibilities (Level 2), and how these measures translated into observed outcomes (Level 3). The CPMI and IOSCO have conducted four Level 1 assessments since the publication of the PFMI. The initial assessment was published in August and the first update was published in May 2014, 18 followed by the second update in June and the third update in June Overall, the third update shows that further progress has been made by the 28 participating jurisdictions since the previous update in completing the process of adopting legislation, regulations and/or policies to support implementation of the PFMI. The Level 1 assessments also showed that jurisdictions have implemented, or are in the process of implementing, the PFMI in different ways. Depending on the national legal and regulatory or oversight framework, some jurisdictions use a policy-based approach (ie rely on a policy statement as the primary tool for adopting the PFMI), some use a rules-based approach (ie rely on rules and/or regulations corresponding to the PFMI) and others combine these two approaches. In this respect, MAS can be described as having adopted a mixture of policy-based and rulesbased approaches for implementing the Principles for the different FMI types. 21 In the Level 1 assessments, Singapore reported that the final implementation measures are in force for all FMI types, for both the Principles and the Responsibilities. In the Level 2 and Level 3 assessments of the Responsibilities, Singapore was assessed to observe all the responsibilities for all FMI types. The CPMI and IOSCO will continue to monitor jurisdictions progress in implementing the Principles and Responsibilities in future assessments. 2.2 Objective and rating The aim of the Level 2 assessment is to determine whether, and to what degree, the content of the legal and regulatory or oversight framework, including any relevant policy statements or other forms of implementation applied in Singapore, is complete and consistent with the Principles. The focus of the Level 2 assessment is on the relevant framework itself, not on the application of this framework by authorities, nor on the FMIs observance. Any planned regulatory changes that Singapore has for improving the degree of consistency with the Principles are also discussed in the assessment but were not considered in assigning ratings of consistency. In conducting the assessment, the CPMI and IOSCO assessed whether there are gaps or shortcomings between implementation measures and the Principles and, if so, evaluated the materiality 17 CPSS-IOSCO, Implementation monitoring of PFMIs Level 1 assessment report, August 2013, 18 CPSS-IOSCO, Implementation monitoring of PFMIs: first update to Level 1 assessment report, May 2014, 19 CPMI-IOSCO, Implementation monitoring of PFMIs: Second update to Level 1 assessment report, June 2015, 20 CPMI-IOSCO, Implementation monitoring of PFMI: Third update to Level 1 assessment report, June 2016, 21 Refer to Section 3 for the overview of the regulatory, supervisory and oversight framework in Singapore. 6 CPMI-IOSCO Implementation monitoring of PFMI: Level 2 assessment report July 2017

11 of the potential impact of those gaps. Ratings were then assigned based on these determinations to reflect the degree of completeness and consistency between an implementation measure and a particular Principle. The rating framework used in Level 2 assessments (Table 1) is an adaptation of the approach described in the PFMI Assessment Methodology (AM). 22 In order to reflect the fact that the purpose of the Level 2 assessment is to evaluate the completeness and consistency of a jurisdiction s implementation measures, rather than whether FMIs in the jurisdiction are in observance of the Principles, the rating levels are:, Broadly consistent, Partly consistent, Not consistent and Not applicable. Status rating of the Level 2 assessment Table 1 Broadly consistent Partly consistent Not consistent NA No implementation measures needed (ie not applicable) The jurisdiction s regulatory framework is consistent with the Principle. The assessment has identified no gaps or shortcomings, or only a few gaps and/or shortcomings that have no material impact on completeness and/or consistency. The jurisdiction s regulatory framework is broadly consistent with the Principle. The assessment has identified gaps and/or shortcomings that have a minor impact on completeness and/or consistency. The jurisdiction s regulatory framework is partly consistent with the Principle. The assessment has identified gaps and/or shortcomings that have a significant impact on completeness and/or consistency. The jurisdiction s regulatory framework is not consistent with the Principle. The assessment has identified gaps and/or shortcomings that have a major impact on completeness and/or consistency. This status corresponds to the case where no relevant FMI exists that is within the scope of the Principles. A rating of NA will be indicated only if no relevant regulatory measures are being taken and no such FMI is expected to develop within the jurisdiction. 2.3 Scope This report covers the implementation measures in Singapore for all FMI types. The main implementation measures assessed for Singapore comprise: MAS Standards for MAS-Operated Financial Market Infrastructures (Standards for MAS-); MAS Infrastructure Standards (Notice on FMIs); MAS Standards for CSDs (Notice on FMIs (CSD)); and MAS Monograph on Supervision of Financial Market Infrastructures in Singapore (Monograph). These policy statements or regulatory instruments build on a number of relevant higher laws and regulations, most notably: the Payment Systems (Oversight) Act (PS(O)A); the Securities and Futures Act, Cap 289 (SFA); the Securities and Futures (Clearing Facilities) Regulations (SF(CF)R); 23 the Securities and Futures (Corporate Governance Of Approved Exchanges, Approved Clearing Houses And 22 CPSS-IOSCO, Principles for financial market infrastructures: Disclosure framework and assessment methodology, December 2012, 23 Securities and Futures (Clearing Facilities) Regulations (SF(CF)R) - CPMI-IOSCO Implementation monitoring of PFMI: Level 2 assessment report July

12 Approved Holding Companies) Regulations (SF(CG)R); 24 the Securities And Futures (Central Depository System) Regulations (SF(CDS)R); and the Securities and Futures (Trade Repositories) Regulations (SF(TR)R). 25 The assessed legal, regulatory and oversight frameworks are further described in Section Process This Level 2 assessment was carried out in three stages over the course of nine months, and the methodology used was the same as the one used for previous Level 2 assessments. In developing its methodology, the IMSG drew heavily on the AM, published in December The assessment proceeded as follows: (i) (ii) (iii) Collection of information based on MAS responses to questionnaires; Off-site review and follow-up exchange of information and discussions with MAS and other members of the IMSG; Review of ratings by and response from MAS. The aim was to gain insight into the regulatory, supervisory and oversight framework as well as the content of existing legislation, regulations and policies used in the implementation of the Principles for all FMI types established in Singapore. The AT conducted a peer review based on the information provided by MAS as noted above. Interactions between the AT members and MAS helped ensure that the AT understood the content and intent of the Singaporean framework and gave the assessed jurisdiction an opportunity to provide feedback to the AT. In addition, discussions with other members of the IMSG helped ensure that a consistent approach was applied across all assessed FMI types and that the approach was consistent with that of previous assessments. The report also reflects input from MAS that reviewed the findings and recommendations and provided a jurisdictional response. A concise summary of the views of MAS is included in the executive summary section of the report. 24 Securities and Futures (Corporate Governance of Approved Exchanges, Approved Clearing Houses and Approved Holding Companies) Regulations (SF(CG)R) - statutes.agc.gov.sg/aol/search/display/view.w3p;page=0;query=docid%3af758823dad6c-4b98-a898-ed21df9d64aa%20depth%3a0%20status%3ainforce;rec=0. 25 Securities and Futures (Trade Repositories) Regulations (SF(TR)R) - or statutes.agc.gov.sg/aol/search/display/view.w3p;page=0;query=docid%3a50efa6e4-7b59-4ca d801d9c8357e%20depth%3a0%20status%3ainforce;rec=0;whole=yes. 8 CPMI-IOSCO Implementation monitoring of PFMI: Level 2 assessment report July 2017

13 3. Overview of the regulatory, supervisory and oversight framework MAS is the sole authority that is responsible for regulation, supervision and oversight of FMIs in Singapore. MAS regulatory role and powers for PSs are set out and provided in the Payment Systems (Oversight) Act (PS(O)A). For the PS owned and operated by MAS, MAS issued the Standards for MAS- to hold itself to minimum standards set out in the PFMI. MAS regulatory role and powers for CCPs, CSDs, s and TRs are set out in the SFA. Pursuant to the relevant parts of the SFA, MAS has issued the regulations and notices setting out further obligations. Any CCP, CSD, and TR that seeks to offer its services in Singapore must be authorised/licensed by MAS before it can commence operations. In addition to obligations set forth in the SFA, regulations and notices, authorised/licensed CCPs, CSDs, s and TRs are also subject to obligations arising from conditions imposed by MAS. The SFA provides MAS with supervisory powers over CCPs, CSDs, s and TRs, including those for warnings and reprimands, directions, fines and composition, removal of officers, and revocation of authorisation of a CCP, CSD, s and TR. For the CSD/ owned and operated by MAS, MAS issued the Standards for MAS- to hold itself to minimum standards set out in the PFMI. Further, MAS issued the Monograph that describes MAS approach to supervising FMIs in Singapore. Notably, the Monograph states that MAS adopts the standards set out in the PFMI when carrying out its supervision of FMIs, and that all systemically important PSs, CSDs, s, CCPs and TRs in Singapore are expected to comply with the PFMI. 3.1 Payment systems In Singapore, PSs, including systemically important payment systems, are regulated, supervised and overseen by MAS. MAS derives its legal powers for PSs from the PS(O)A. MAS has information-gathering and regulatory powers under the PS(O)A. The regulatory powers under the PS(O)A allow MAS to designate and regulate PSs whose smooth operation is considered important for the stability of the financial system, or public confidence in the financial system. Specifically, MAS may designate a PS deemed to be either a systemically important PS (SIPS) or a system-wide important PS (SWIPS). SIPS are systems whose disruption could trigger, cause or transmit further disruption to participants or cause systemic disruption to the financial system of Singapore. All SIPS are subject to the PFMI. As of July 2016, MEPS+ is the only PS in Singapore designated as a SIPS and subject to the PFMI. MEPS+ is a RTGS system owned and operated by MAS. SWIPS are systems whose disruption could affect public confidence in PSs or the financial system of Singapore. Although a disruption or failure in these systems may have system-wide implications and may affect many users, there is negligible risk of systemic impact to financial stability. MAS does not subject SWIPS to the PFMI. The Singapore Dollar Cheque Clearing System, US Dollar Cheque Clearing System, Interbank GIRO System, Fast and Secure Transfers and NETS Electronic Fund Transfers at Point of Sale are considered SWIPS and have been designated under the PS(O)A as of July These SWIPS are commercially owned and operated. Further, on the basis of the Monograph, MAS has committed itself to adopting the PFMI when carrying out its supervision on SIPS. CPMI-IOSCO Implementation monitoring of PFMI: Level 2 assessment report July

14 As the PS(O)A was designed for commercial payment systems, MAS has published the Standards for MAS- to hold MEPS+ to minimum standards set out in the PFMI. 3.2 Central counterparties and securities settlement systems In Singapore, a corporation that operates a CCP or is deemed systemically important and is regulated and supervised by MAS as an Approved Clearing House (ACH) under the same statutory framework. MAS legal powers for the regulation and supervision of CCPs and s are derived from Part III of the SFA. Pursuant to Part III of the SFA, MAS has issued the following regulations and notices setting out further obligations on CCPs and s: (1) SF(CF)R on the general obligations of CCPs and s on matters such as authorisation, risk management and capital requirements; (2) SF(CG)R on the corporate governance requirements for CCPs, s and their holding companies; and (3) Notice on FMIs that complements the SFA and accompanying regulations in setting out the Principles and key considerations of the PFMI with which CCPs and s must comply. Further, on the basis of the Monograph, MAS has committed itself to adopting the PFMI when carrying out its supervision on ACHs. For the MAS-owned and operated, MAS has published the Standards for MAS-Operated FMIs to hold the to minimum standards set out in the PFMI. As of July 2016, there are three CCPs in Singapore, the Central Depository (Pte) Limited (CDP), Singapore Exchange Derivatives Clearing Limited (SGX-DC) and ICE Clear Singapore Pte Ltd (ICSG), and two s, CDP and MEPS+. All are subject to the PFMI. 3.3 Central securities depositories In Singapore, a CSD is regulated and supervised by MAS as a Central Depository System (CDS). MAS legal powers for the regulation and supervision of CSDs are derived from Part IIIAA of the SFA. Pursuant to Part IIIAA of the SFA, MAS has issued the following regulations and notices setting out further obligations on CSDs: (1) SF(CDS)R on the general obligations of CSDs; and (2) Notice on FMI (CSD) to complement the SFA and SF(CDS)R in setting out the Principles and key considerations of the PFMI with which CSDs must comply. Further, on the basis of the Monograph, MAS has committed itself to adopting the PFMI when carrying out its supervision on licensed CSDs. For the MAS-owned and operated CSD, MAS has published the Standards for MAS-Operated FMIs to hold the CSD to minimum standards set out in the PFMI. PFMI. As of July 2016, there are two CSDs in Singapore, CDP and MEPS+. Both are subject to the 3.4 Trade repositories In Singapore, a TR is regulated and supervised by MAS as a Licensed Trade Repository (LTR). MAS legal powers for the regulation and supervision of TRs are derived from Part IIA of SFA. Pursuant to Part IIA of the SFA, MAS has issued the following regulations and notices setting out further obligations on TRs: (1) SF(TR)R on the general obligations of TRs; and (2) Notice on FMIs that complements the SFA and SF(TR)R in setting out the PFMI principles and key considerations with which TRs must comply. This is the same notice that also applies to CCPs and s (as described in Section 3.3 above). 10 CPMI-IOSCO Implementation monitoring of PFMI: Level 2 assessment report July 2017

15 Further, on the basis of the Monograph, MAS has committed itself to adopting the PFMI when carrying out its supervision on LTRs. Additionally, MAS has a Memorandum of Understanding (MOU) with other authorities to allow TRs to provide them with prescribed information necessary for market transparency and disclosure of trade data. As of July 2016, there is one TR in Singapore, DTCC Data Repository (Singapore) Pte. Ltd. (DDRS), and it is subject to PFMI. CPMI-IOSCO Implementation monitoring of PFMI: Level 2 assessment report July

16 4. Assessment and recommendations 4.1 Summary assessment of completeness and consistency with the Principles This section provides a high-level summary of the consistency and completeness of the regimes in Singapore for PSs, CCPs, CSDs/s and TRs with respect to the Principles. A more detailed assessment, including citations of the relevant legislation, regulation, policy and guidance, and notes explaining the assigned ratings, is provided in a tabular form in Section Overview The AT found that Singapore has consistently adopted all but one of the Principles across FMI types. The approach taken by Singapore to adopt the PFMI included a mixture of primary laws, secondary regulations and notices, supervisory conditions and directions, and policy statements. For PSs, MAS adoption of the Principles through the Standards for MAS- and the Monograph was assessed to be consistent and complete. For CCPs, MAS adoption of the Principles through the SFA, SF(CF)R, Notice on FMIs and the Monograph was assessed to be consistent and complete. For CSDs, MAS adoption of the Principles through the SFA, SF(CDS)R, Notice on FMI (CSD), the Standards for MAS- and the Monograph was assessed to be consistent and complete. For s, MAS adoption of the Principles through the SFA, SF(CF)R, Notice on FMIs, the Standards for MAS- and the Monograph was assessed to be consistent and complete. For TRs, MAS have adopted all the Principles, except for Principle 24, consistently through SFA, SF(TR)R and Notice on FMIs and the Monograph. Tables 2 5 summarise the assessment ratings by Principle for each FMI type General observations In conducting the assessment, the AT considered all of MAS implementation measures issued before the cut-off date for the assessment. For FMIs not operated by MAS, the AT identified a number of KCs 26 for which the applicable regulations or notices are not articulated in full conformity with, or do not have the same level of granularity as, the respective KCs in the PFMI. MAS, through its ongoing supervision, expects FMIs to comply with the PFMI in their entirety. This expectation is in accordance with its commitment made in the Monograph, which states that MAS adopts the standards set out in the PFMI when carrying out its supervision of FMIs. The Monograph, combined with evidence from MAS that demonstrated effective uses of the Principles as part of its supervision, was considered sufficient to assume the general applicability and enforceability of the Principles and KCs through the approach taken by MAS. Accordingly, in conducting the assessment, the AT considered the complementary aspect of the requirements imposed by the Monograph and through MAS ongoing supervision in cases where the relevant regulations or notices are not articulated in full conformity with. or do not have the same level of granularity as, the respective KCs. 26 These include Principle 2 KC 1, Principle 2 KC 4, Principle 3 KC 4, Principle 15 KC 4, Principle 18 KC 3, Principle 20 KC1 and Principle 24 KC 3 for CCPs, CSDs/ and TRs. 12 CPMI-IOSCO Implementation monitoring of PFMI: Level 2 assessment report July 2017

17 4.1.3 Payment systems Ratings summary 27 for PSs Table 2 Assessment category Principle Principles 1, 2, 3, 4, 5, 7, 8, 9, 12, 13, 15, 16, 17, 18, 19, 21, 22 and 23 Broadly consistent None Partly consistent None Not consistent None Not applicable None The AT concluded that the Principles relevant for PSs have been implemented in a complete and consistent manner through the Standards for MAS- and the Monograph. The AT notes that some elements or key considerations of the Principles are not applied to or are applied differently to the PS owned and operated by MAS, which is the only PS in Singapore that is subject to the PFMI as a systemically important payment system. This approach is consistent with paragraph 1.23 of the PFMI as further clarified in the CPMI-IOSCO CBFMI guidance. (See Section below.) Central counterparties Ratings summary 28 for CCPs Table 3 Assessment category Principle Principles 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 12, 13, 14, 15, 16, 17, 18, 19, 20, 21, 22 and 23 Broadly consistent Partly consistent Not consistent Not applicable None None None None The AT concluded that the Principles relevant for CCPs have been implemented in a complete and consistent manner through the SFA, SF(CF)R, Notice on FMIs and the Monograph (including complementary requirements imposed as part of ongoing supervision by MAS). 27 The rating summary lists only those Principles that are applicable to the given type as defined in paragraphs and shown in Table 1 of the PFMI. 28 The rating summary lists only those Principles that are applicable to the given type as defined in paragraphs and shown in Table 1 of the PFMI. CPMI-IOSCO Implementation monitoring of PFMI: Level 2 assessment report July

18 4.1.5 Central securities depositories and securities settlement systems Ratings summary for CSDs/s Table 4 Assessment category Principle Principles 1, 2, 3, 4, 5, 7, 8, 9, 10, 11, 12, 13, 15, 16, 17, 18, 19, 20, 21, 22 and 23 Broadly consistent Partly consistent Not consistent Not applicable None None None None The AT concluded that the Principles relevant for CSDs have been implemented in a complete and consistent manner through the SFA, SF(CDS)R, Notice on FMI (CSD), the Standards for MAS-Operated FMIs and the Monograph (including the complementary requirements imposed as part of ongoing supervision by MAS). The AT concluded that the Principles relevant for s have been implemented in a complete and consistent manner through the SFA, SF(CF)R, Notice on FMIs, the Standards for MAS-Operated FMIs and the Monograph (including complementary requirements imposed as part of ongoing supervision by MAS). The AT notes that some elements or KCs of the Principles relevant for CSDs/s are not applied to or applied differently to the CSD/ owned and operated by MAS. This approach is consistent with paragraph 1.23 of the PFMI as further clarified in the CPMI-IOSCO CBFMI guidance. (See below.) Trade repositories Ratings summary 29 for TRs Table 5 Assessment category Principle Principles 1, 2, 3, 15, 17, 18, 19, 20, 21, 22 and 23 Broadly consistent None Partly consistent Principle 24 Not consistent Not applicable None None MAS has incorporated the Principles into its policy and regulatory framework for the regulation, supervision and oversight of TRs and has mostly done so in a complete and consistent manner. The AT nevertheless identified gaps between the regulatory documents and the PFMI with respect to Principle 24 (disclosure of market data by trade repositories). DDRS, the sole TR operating in Singapore as of the cut-off date, is required by MAS, as part of its ongoing supervision, to submit to MAS all the transaction data reported to DDRS. 29 The rating summary lists only those Principles that are applicable to the given type as defined in paragraphs and shown in Table 1 of the PFMI. 14 CPMI-IOSCO Implementation monitoring of PFMI: Level 2 assessment report July 2017

19 Further, MAS entered into a MOU with the relevant authorities to provide them with access to the data in DDRS. MAS has authority under the SFA to direct a TR to publish information related to the transactions reported to it. As of the cut-off date, however, MAS had not exercised this authority. Accordingly, there are currently neither legal nor supervisory requirements or expectations set forth by MAS for, nor actual practice of, disclosure of the TR data to the public, which is a major aspect of Principle 24. It is acknowledged that MAS is actively considering appropriate requirements for TRs to publish the data in a manner that will help to achieve the objectives of the public disclosure FMIs owned and operated by MAS In Singapore, MAS owns and operates MEPS+, which is both a SIPS and a CSD/ and subject to the Principles. Under the Standards for MAS-, some elements or KCs of the Principles are not applied to, or are applied differently to, the FMIs owned and operated by MAS. 30 MAS has incorporated the KCs of the PFMI near-verbatim into the Standards for MAS- that are applicable to the FMIs owned and operated by MAS. However, the Standards for MAS- contain caveat statements for certain Principles and KCs that refer to the CPMI-IOSCO CBFMI guidance and note that adherence to these Principles and KCs in the PFMI are not intended to constrain certain roles performed by MAS as the central bank. This approach taken by MAS is consistent with paragraph 1.23 of the PFMI as further clarified in the CPMI-IOSCO CBFMI guidance, given that MAS intends to generally adhere to the relevant PFMI requirements and to apply exemptions only where constraints are identified and justified; and that such exemptions are indeed strictly limited to those Principles and KCs that are referenced in the CPMI- IOSCO CBFMI guidance. Accordingly, the Principles applied to these central bank-owned and -operated FMIs in Singapore, within the context of this Report, have been evaluated to be consistent with the PFMI. 30 Those Principles and KCs are Principle 3 KC4, Principle 4, Principle 5 KC 1, Principle 13, Principle 15 KCs 2 5, Principle 16 and 18. CPMI-IOSCO Implementation monitoring of PFMI: Level 2 assessment report July

20 4.2 Singapore s completeness and consistency with the Principles Review and recommendations Payment systems Implementation of the principles 1. Text of applicable Principles and Key Considerations (KCs) Implementation measures of the jurisdiction 3. Key conclusions for principle 4. Recommendations and comments Principle 1: Legal basis Refer to KCs. An FMI should have a well-founded, clear, transparent, and enforceable legal basis for each material aspect of its activities in all relevant jurisdictions. 1. The legal basis should provide a high degree of certainty for each material aspect of an FMI s activities in all relevant jurisdictions. Paragraph 2.2 of the Standards for MAS-Operated FMIs 2. An FMI should have rules, procedures, and contracts that are clear, understandable, and consistent with relevant laws and regulations. Paragraph 2.3 of the Standards for MAS-Operated FMIs 3. An FMI should be able to articulate the legal basis for its activities to relevant authorities, participants, and, where relevant, participants customers, in a clear and understandable way. Paragraph 2.4 of the Standards for MAS-Operated FMIs 4. An FMI should have rules, procedures, and contracts that are enforceable in all relevant jurisdictions. There should be a high degree of certainty that actions taken by the FMI under Paragraph 2.5 of the Standards for MAS-Operated FMIs 31 Only the relevant principles for PSs (as set forth in the annex E of the PFMI) are included. 16 CPMI-IOSCO Implementation monitoring of PFMI: Level 2 assessment report July 2017

21 such rules and procedures will not be voided, reversed, or subject to stays. 5. An FMI conducting business in multiple jurisdictions should identify and mitigate the risks arising from any potential conflict of laws across jurisdictions. Paragraph 2.6 of the Standards for MAS-Operated FMIs Principle 2: Governance An FMI should have governance arrangements that are clear and transparent, promote the safety and efficiency of the FMI, and support the stability of the broader financial system, other relevant public interest considerations, and the objectives of relevant stakeholders. Refer to KCs. 1. An FMI should have objectives that place a high priority on the safety and efficiency of the FMI and explicitly support financial stability and other relevant public interest considerations. Paragraph 2.7 of the Standards for MAS-Operated FMIs 2. An FMI should have documented governance arrangements that provide clear and direct lines of responsibility and accountability. These arrangements should be disclosed to owners, relevant authorities, participants, and, at a more general level, the public. Paragraph 2.8 of the Standards for MAS-Operated FMIs 3. The roles and responsibilities of an FMI s board of directors (or equivalent) should be clearly specified, and there should be documented procedures for its functioning, including Paragraph 2.9 of the Standards for MAS-Operated FMIs CPMI-IOSCO Implementation monitoring of PFMI: Level 2 assessment report July

22 procedures to identify, address, and manage member conflicts of interest. The board should review both its overall performance and the performance of its individual board members regularly. 4. The board should contain suitable members with the appropriate skills and incentives to fulfil its multiple roles. This typically requires the inclusion of non-executive board member(s). 5. The roles and responsibilities of management should be clearly specified. An FMI s management should have the appropriate experience, a mix of skills, and the integrity necessary to discharge their responsibilities for the operation and risk management of the FMI. 6. The board should establish a clear, documented risk-management framework that includes the FMI s risk-tolerance policy, assigns responsibilities and accountability for risk decisions, and addresses decision making in crises and emergencies. Governance arrangements should ensure that the riskmanagement and internal control functions have sufficient authority, independence, resources, and access to the board. 7. The board should ensure that the FMI s design, rules, overall strategy, and major decisions reflect appropriately the legitimate interests of its direct and indirect participants and other relevant stakeholders. Major decisions should be clearly disclosed to relevant stakeholders Paragraph 2.10 of the Standards for MAS- Paragraph 2.11 of the Standards for MAS- Paragraph 2.12 of the Standards for MAS- Paragraph 2.13 of the Standards for MAS- 18 CPMI-IOSCO Implementation monitoring of PFMI: Level 2 assessment report July 2017

23 and, where there is a broad market impact, the public. Principle 3: Framework for the comprehensive management of risks An FMI should have a sound riskmanagement framework for comprehensively managing legal, credit, liquidity, operational, and other risks. Refer to KCs. 1. An FMI should have risk-management policies, procedures, and systems that enable it to identify, measure, monitor, and manage the range of risks that arise in or are borne by the FMI. Risk-management frameworks should be subject to periodic review. Paragraph 2.14 of the Standards for MAS- 2. An FMI should provide incentives to participants and, where relevant, their customers to manage and contain the risks they pose to the FMI. Paragraph 2.15 of the Standards for MAS- 3. An FMI should regularly review the material risks it bears from and poses to other entities (such as other FMIs, settlement banks, liquidity providers, and service providers) as a result of interdependencies and develop appropriate risk-management tools to address these risks. Paragraph 2.16 of the Standards for MAS- 4. An FMI should identify scenarios that may potentially prevent it from being able to provide its critical operations and services as a going concern and assess the effectiveness of a full range of options for recovery or orderly wind-down. An FMI should prepare appropriate Not applicable for central bank-owned and operated FMIs as elaborated in the CPMI-IOSCO Guidance note on Application of the Principles for financial market infrastructures to central bank FMIs (August 2015). The approach taken by MAS is consistent with paragraph 1.23 of the PFMI, as elaborated in the CPMI-IOSCO Guidance note Application of the Principles for CPMI-IOSCO Implementation monitoring of PFMI: Level 2 assessment report July