Japan is making satisfactory steps with the implementation of arrangements for central counterparties and trade repositories, according to the International Organization of Securities Commissions (IOSCO) and the Committee on Payments and Market Infrastructures (CPMI) which have published a report on Japan’s progress towards implementation of the Principles for Financial Market Infrastructures.
In Japan, there are two authorities responsible for the supervision and oversight, the Financial Services Agency (FSA) and the Bank of Japan (BOJ). These authorities have overlapping responsibilities for central counterparties and trade repositories.
According to the new report the principles have been implemented in a complete and consistent manner in Japan, and all relevant policies have been adopted by the FSA and BOJ.
The FSA went beyond the basic requirements and incorporated the principles into its supervisory framework by publishing supervisory guidelines. However, the report qualified this by saying that the guidelines do not always mirror those of the principles and there were gaps attributable to ‘idiosyncrasies of the Japanese regulatory regime and the structure and practices of Japanese financial markets’. Such inconsistencies, it said, may result in ambiguous supervisory expectations for central counterparties and trade repositories. The report recommended that the FSA should address that – which the regulator subsequently has promised to do.
CPMI and IOSCO said they consider the implementation monitoring exercise to be very important, especially given the role played by central counterparties and trade repositories in the OTC derivatives market arising from G20 regulatory reforms.
Earlier, in April 2012, the two bodies published a report setting out the principles, which set out the design and operation of key financial markets infrastructure in order to enhance their safety and efficiency, to limit systemic risk and foster transparency. The principles applied to all systemically important payment systems, central securities depositories), securities settlement systems, central counterparties and trade repositories.