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CPSS-IOSCO Principles for FMIs and TM Assessments Ana Giraldo

CPSS-IOSCO Principles for FMIs and TM Assessments Ana Giraldo. Guatemala - April 2013. Agenda. CPSS – IOSCO Principles Vs Thomas Murray’s Risks Key differences Comparison of CPSS-IOSCO, AGC and TM CPSS-IOSCO principles in TM public ratings.

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CPSS-IOSCO Principles for FMIs and TM Assessments Ana Giraldo

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  1. CPSS-IOSCO Principles for FMIs and TM AssessmentsAna Giraldo Guatemala - April 2013

  2. Agenda • CPSS – IOSCO Principles Vs Thomas Murray’s Risks • Key differences • Comparison of CPSS-IOSCO, AGC and TM • CPSS-IOSCO principles in TM public ratings

  3. I. CPSS-IOSCO Principles vs Thomas Murray’s Risks

  4. CPSS-IOSCO vs TM Ratings

  5. CPSS-IOSCO vs TM Ratings

  6. II. Key Differences Between ThomasMurray’s Assessments and IOSCO Self-Assessments

  7. Key Differences with other Assessments

  8. Asset Servicing Risk • Why Asset Servicing Risk is important? • Trend: There is an increasing number of CSDs providing asset servicing and corporate actions-related services to participants. • Risk: Asset servicing carries a high degree of risk given that it is a commercial activity. In many cases it can be provided in competition with custodians. It is also the area with the largest potential losses for a CSD. • TM weighting: TM gives a high weighting to the overall risk score to asset servicing risk. In fact, it is the heaviest single weighted risk in our methodology. • Involvement of CSDs: There is a varied degree of involvement in asset servicing ranging from simple interest payment distribution to complex corporate actions processing. Back

  9. Asset Servicing Risk Why Asset Servicing Risk is important? Back

  10. Data Updates • Continuous Updates • Thomas Murray provides on-going surveillance on changes to the CSDs, CCPs and capital market infrastructures. • Thomas Murray receives information directly from local sources such as support banks, CSDs, stock exchanges and regulators. There is also a (at least) monthly monitoring of websites to ensure developments are not missed. • Daily newsflashes are sent to clients and other interested parties in respect of changes and developments in the marketplaces. • A risk impact is added every time a piece of news has a relevant impact on any of the assessed entities. • Assessments are updated and revised upon receipt of information. The ratings are also reviewed and taken to the Ratings Committee if a significant event takes place. • There are also annual general updates with the co-operation of the CSDs and the support banks to validate the data. Back

  11. Permanent Updates Number of Newsflashes Sent by Thomas Murray Back

  12. Data Validation • Validation • Thomas Murray information is collected from CSDs but data is validated by some participants that are our support banks. • The support banks provide an annual update and review of Thomas Murray assessments. • Examples of support banks:

  13. Best Market Practice • Adherence to best market practices • Thomas Murray’s assessment methodology is based on best market practices rather than minimum standards. • Thomas Murray provides a gap analysis that shows the CSD where it stands compared to best market practices. • The rating scale is designed in a way that CSDs can determine how far they are from the best market practice in each risk.

  14. Transparency • Transparency of methodology and reports • Thomas Murray’s assessment methodology is published so CSDs can understand the basis they have been rated. • TM methodology is prescriptive and detailed enough for CSDs to determine their strengths and weaknesses in each risk. • TM reports are available to all our clients and public rating reports are publicly available. • TM reports are also available to the CSDs once they are finalised/updated. Since the reports highlight the strength and weaknesses, CSDs can use them to decide areas to work on and issues to address.

  15. Separate Assessments • Analysis per type of entity • Thomas Murray undertakes separate assessments and analysis according to the type of infrastructure entity. • Different types of risks apply to different type of infrastructure entity (e.g. • CPSS-IOSCO principles for FMIs apply equally to all FMIs although some principles are not applicable to all (e.g Principle 6: Margin, only applies to CCPs). Back

  16. III. Comparison Between AGC, CPSS-IOSCO and TM on Key Issues

  17. CPSS/IOSCO

  18. IV. CPSS-IOSCO Principles for FMIs in TM Public Ratings

  19. Thank you! December 2012

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