Incentives to centrally clear over-the-counter (OTC) derivatives

This final report from the Financial Stability Board (FSB), the Basel Committee on Banking Supervision (BCBS), the Committee on Payments and Market Infrastructures (CPMI) and the International Organization of Securities Commissions (IOSCO) examines the effects of G20 financial regulatory reforms on the incentives to centrally clear over-the-counter (OTC) derivatives.

The central clearing of standardised OTC derivatives is a pillar of the G20 Leaders' commitments to reform OTC derivatives markets in response to the financial crisis. A number of post-crisis reforms are, directly or indirectly, relevant to incentives to centrally clear. A large majority of the relevant international standards have been agreed upon and are being implemented. This evaluation is one of the first using the FSB framework for the post-implementation evaluation of the effects of the G20 financial regulatory reforms.

An earlier version of this report was subject to public consultation and responses to the consultation have informed the final report. An overview of responses to the consultation can be found here. The report concludes that the reforms - particularly capital requirements, clearing mandates and margin requirements for non-centrally cleared derivatives - are achieving their goals of promoting central clearing, especially for the most systemic market participants. This is consistent with the goal of reducing complexity and improving transparency and standardisation in the OTC derivatives markets. Beyond the systemic core of the derivatives network of CCPs, dealers/clearing service providers and larger, more active clients, the incentives are less strong.

The report identifies reform areas that may merit consideration by the relevant standard-setting bodies (SSBs). The findings from the report will inform relevant SSBs regarding any subsequent policy efforts and potential adjustments, bearing in mind the original objectives of the reforms. This does not imply a scaling back of those reforms or an undermining of members' commitment to implement them.