Taken together, we have made considerable progress in terms of the global regulatory regime to reflect the growing importance of FMIs and central counterparties (CCPs) within the financial system.
Let me briefly list a few of the accomplishments of the PFMI:
• They are now being globally adopted and implemented as mandatory, and the specific requirements themselves have been raised substantially. For example, there is a new, explicit liquidity standard to ensure that payments are made on time and in the right currency, and the cover 2 requirement for complex CCPs is much tougher than what came before it.
• They also provide greater detail and scope, including more detailed guidance with respect to CCPs and trade repositories (TRs).
• They are underpinned by a detailed disclosure framework, an agreed assessment methodology and a rigorous monitoring program to both promote consistency in how authorities have adopted and implemented the PFMI as well as, importantly, to promote consistency in outcomes.
• They provide greater harmonization to avoid regulatory arbitrage and race to the bottom behaviors.
• They include requirements and guidance for FMIs to implement their own viable recovery and orderly wind-down plans.
As I see it, great progress has been made, but there is more work to do in a number of areas:
• Greater harmonization and better cross-border mutual recognition practices;
• CCP recovery and resilience as well as coordination with other authorities to ensure incentives are aligned;
• Appropriate incentives for CCPs so that the profit motive does not conflict with having a safe system that can absorb large shocks without destabilizing the financial system; and
• Availability of data in TRs on a cross-border basis to facilitate the development of a more complete picture of market activities and emerging risks.