CENTRAL bankers and securities regulators yesterday gave the global financial industry a new tool to help it reduce the risks from settling securities transactions, such as bonds and shares.
The tool, in the form of a questionnaire to operators of securities settlement systems called a disclosure framework, does not provide answers to risk management issues, but is rather intended to help the industry discuss and better understand these risks.
The disclosure framework was developed by a broad working group with representatives from the Group of 10's (G10) Committee on Payment and Settlement Systems and the International Organisation of Securities Commissions, together with private sector settlement system operators.
The framework was released yesterday in Geneva in a joint report by the CPSS and IOSCO. In January, the report was presented to G10 central bank governors at the BIS, the bank for International Settlements.
"These are very important reports and should not be underestimated," the Bundesbank president, Mr Hans Tietmeyer, said at the time, when referring to the disclosure framework.
The G10 actually comprises 11 countries the US, Japan, Germany, Canada, France, Britain, Italy, the Netherlands, Belgium, Sweden and Switzerland.
The working group included members from both developed and emerging markets, illustrating the growing collaboration between G10 industrial countries and emerging nations in financial industry regulation.
CPSS, based at the BIS, and Montreal based IOSCO, which groups securities supervisors worldwide, have been concerned for many years with the potential risks from arrangements to settle securities transactions between financial institution.
The disclosure framework should help improve transparency of the mechanisms used to settle transactions at a time when the volume of transactions has forced operators of settlement systems to develop faster processes for exchange securities and more efficient links between systems. However, apparent similarities in settlement technologies and services could mask significant differences in securities settlement arrangements and management, the report warned.
