REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND THE COUNCIL The International Treatment of Central Banks and Public Entities Managing Public Debt with regard to OTC Derivatives Transactions
Date: 2013-03-22
Institutions: European Commission
Subjects: Australia, Canada, Hong Kong, Japan, Switzerland, United States, central bank, disclosure of information, financial legislation, financial transaction, public debt

EUROPEAN 
COMMISSION 

Brussels, 22.3.2013  
COM(2013) 158 final 

REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND 
THE COUNCIL 

The International Treatment of Central Banks and Public Entities Managing Public 
Debt with regard to OTC Derivatives Transactions 

(Text with EEA relevance) 

EN 

   EN 

 
 
 
 
  
 
 
1. 

INTRODUCTION 

The Regulation on OTC derivatives, central counterparties and trade repositories (EMIR) 
was adopted on 4 July 2012 and entered into force on 16 August 20121. EMIR requires 
the  central  clearing  of  all  standardised  OTC  derivatives  contracts  (clearing  obligation), 
margins for non-centrally cleared contracts (margins requirements) and the reporting of 
all derivatives contracts to trade repositories (reporting obligation). 

The  Union’s  central  banks  and  Union  public  bodies  charged  with  or  intervening  in  the 
management of  public debt are  exempted  from EMIR and are, therefore, not subject to 
the  clearing  obligation,  to  risk-mitigation  techniques  for  uncleared  trades  or  to  the 
reporting obligation. 

At  the  time  of  adoption  of  EMIR,  there  were  uncertainties  on  the  treatment  of  foreign 
central  banks  in  the  application  of  OTC  derivatives  reforms  in  other  jurisdictions.  The 
European Parliament and the Council therefore postponed a decision on the application 
of EMIR to third-country central banks until more clarity could be reached on this issue. 

The  European  Commission  was  requested  under  Article  1(6)  of  EMIR  to  analyse  the 
international  treatment  of  central  banks  and  of  public  bodies  managing  public  debt  in 
other  jurisdictions’  legal  framework  and  to  inform  the  European  Parliament  and  the 
Council of its comparative analysis three months after the entry into force of EMIR. If 
the  report  concludes  that  the  exemption  of  the  monetary  responsibilities  of  those  third-
country  central  banks  from  the  clearing  and  reporting  obligation  is  necessary,  EMIR 
empowers the Commission to adopt a delegated act to extend the list of exempted entities 
under EMIR. 

2.  THE REPORT'S LEGAL BASIS: EMIR ARTICLE 1 REQUIREMENTS 

EMIR Article 1(4) provides that "This Regulation shall not apply to: (a) the members of 
the ESCB and other Member States' bodies performing similar functions and other Union 
public bodies charged with or intervening in the management of the public debt; (b) the 
Bank for International Settlements". 

With  regard  to  foreign  central  banks  and  foreign  public  bodies  managing  public  debt, 
Article  1(6)  empowers  the  Commission  to  adopt  delegated  acts  to  amend  the  list  of 
exempted entities in Article 1(4) and, to that end, requires the Commission to "present to 
the European Parliament and the Council a report assessing the international treatment 
of public bodies charged with or intervening in the management of the public debt and 
central banks" three months after the entry into force of EMIR. 

Article  1(6)  also  specifies  that  "The  report  shall  include  a  comparative  analysis  of  the 
treatment of those bodies and of central banks within the legal framework of a significant 
number  of  third  countries,  including  at  least  the  three  most  important  jurisdictions  as 
regards  volumes  of  contracts  traded,  and  the  risk-management  standards  applicable  to 
the  derivative  transactions  entered  into  by  those  bodies  and  by  central  banks  in  those 
jurisdictions. If the report concludes, in particular in regard to the comparative analysis, 
that the exemption of the monetary responsibilities of those third- country central banks 

1   Regulation (EU) No 648/2012. 

 
 
                                                 
from the clearing and reporting obligation is necessary, the Commission shall add them 
to the list set out in paragraph 4 [list of exempted entities under EMIR]." 

3.  JURISDICTIONS CONSIDERED: JAPAN, SWITZERLAND AND THE UNITED STATES 

EMIR  requires  the  Commission  to  conduct  a  comparative  analysis  of  the  treatment  of 
central banks and public bodies managing public debt in "a significant number of third 
countries, including at least the three most important jurisdictions as regards volumes of 
contracts traded". 

3.1.  Three  most  important  jurisdictions  as  regards  volumes  of  contracts 

traded: United States, Switzerland and Japan 

Given  the  global  nature  of  OTC  derivatives  markets  and  the  historical  lack  of 
transparency  in  these  markets,  detailed  data  on  OTC  derivatives  by  jurisdictions 
worldwide  were  not  available.  Nevertheless,  banks'  total  balance  sheets  can  serve  as  a 
useful and simple proxy for the size of the banks' OTC derivatives portfolio and volumes 
of contracts traded by jurisdictions. It is also a good indicator of the systemic risk these 
markets present. The Bank of International Settlements (BIS) provides detailed statistics 
on banks' balance sheets by jurisdictions which have been used in this report to select the 
jurisdictions to be analysed. 

According  to  the  most  recent  BIS  data2  ("Amounts  outstanding  for  the  International 
positions by nationality of ownership of reporting banks", March 2012), the three most 
important  jurisdictions  as  regards  volumes  of  contracts  traded  using  the  banks'  total 
balance  sheet  as  proxy  are  the  United  States,  Japan  and  Switzerland.  The  table  below 
shows  the  most  recent  BIS  data  for  the  most  important  jurisdictions.  Non-EU 
jurisdictions are in bold. 

Parent country of bank 
USA 
UK 
France 
Germany 
Switzerland 
Japan 
Netherlands 
Sweden 
Australia 
Spain 
Canada 
Italy 
Hong Kong SAR 

Total positions/Liabilities 

5012.2 
4885.9 
3484.4 
3349.2 
2751.9 
2361.1 
1705.4 
1291.7 
948.5 
916.0 
912.5 
825.1 
539.0 

Table: International positions by nationality of ownership of reporting banks,  
Amounts outstanding in billions of US dollars, 
Source: BIS 

2 

http://www.bis.org/statistics/bankstats.htm, Table 8A 

3 

 
                                                 
3.2.  Other significant jurisdictions: Australia, Canada, Hong-Kong 

With the view to include a larger number of third countries in the comparative analysis, 
the report also analyses the legislative framework of Australia, Canada and Hong Kong 
with  respect  to  OTC  derivatives  markets,  which  are  the  three  next  most  important 
jurisdictions as regards volumes of contracts traded. 

3.3.  Advance made with regard to reforms on OTC derivatives markets in the 
United States, Switzerland, Japan, Australia, Canada and Hong Kong 

This  report  gives  a  comparative  analysis  of  the  regulatory  framework  in  the  United 
States, Switzerland, Japan, Australia, Canada and Hong Kong. The Commission services 
have  contacted  these  jurisdictions  to  gather  information  on  their  relevant  legal 
frameworks  on  OTC  derivatives  transactions  applicable  to  central  banks  and  public 
bodies charged with or intervening in the management of the public debt. It is important 
to  note  that  these  jurisdictions  are  at  different  stages  with  regard  to  the  process  of 
adopting and implementing OTC derivatives reforms. The United States are entering the 
implementation phase. Japan has just recently passed its new regulation. Switzerland is in 
the  phase  of  preparing  a  draft  regulation  to  introduce  a  new  regulatory  framework. 
Australia  and  Hong  Kong  have  proposed  their  regulatory  regime  to  implement  OTC 
derivatives  reforms  but  they  have  not  yet  been  adopted.  Canada  is  still  finalizing  its 
proposal for its legal framework for the implementation of OTC derivatives reforms. 

•  USA 

The  Dodd-Frank  Wall  Street  Reform  and  Consumer  Protection  Act  was  passed  in 
July 2010.  Since  then,  the  Commodity  Futures  Trading  Commission  (CFTC)  and 
Securities and Exchange Commission (SEC) have finalized the majority of implementing 
rules  to  be  developed  under  Dodd-Franck.  The  United  States  are  now  entering  the 
implementation phase, with a phase-in approach described below. 

Reporting obligation 

Mandatory reporting and transparency rules started applying from 12 October 2012. The 
reporting  obligation  is  phased-in  by  products  and  types  of  market  participant:  (i)  from 
12 October 2012,  major  market  participants3  must  commence  reporting  interest  rate 
swaps and credit default swaps; (ii) from January 2013, the reporting obligation for these 
participants  will  be  extended  to  equity  swaps,  foreign  exchange  swaps  and  other 
commodity swaps; and (iii) from April 2013, all market participants (including non-swap 
dealer or non-major swaps participants) will have to comply with the reporting obligation 
in all asset classes. 

Clearing obligation 

The  clearing  obligation  will  be  phased-in  by  products  and  type  of  market  participants. 
The  CFTC  proposed  on  24 July 2012  the  first  classes  of  swaps  that  will  be  subject  to 
mandatory clearing, which includes two classes of credit default swaps and four classes 
of interest rate swaps to be cleared by registered central counterparties and the rules will 
be finalised by Q4 2012. A phased-in approach by type of market participant will then 

3  Exchanges  and  platforms,  clearing  houses,  swap  data  repositories,  Swap  Dealers  (SDs),  and  Major 

Swaps Participants (MSPs). 

4 

 
                                                 
apply (90/180/270 days to comply with the clearing obligation)4. A similar approach will 
follow for other asset classes. 

•  Switzerland 

There is no mandatory clearing or trade reporting regime in place in Switzerland for OTC 
derivatives transactions. Switzerland is, however, committed to the implementation of the 
G20 reforms on OTC derivatives. The Swiss Federal Council decided on 27 August 2012 
that  the  existing  Swiss  regulation  of  financial  market  infrastructure  needed  to  be 
amended  to  comply  with  the  FSB  recommendations  and  with  the  new  standards 
developed by international standards setters for financial market infrastructures. 

The  Federal  Department  of  Finance  has  been  instructed  to  prepare  a  draft  consultation 
paper by spring 2013 and aims at coordinating its approach with the EU with the view to 
adopt a regulation equivalent to EMIR. In its press release of 29 August 2012, the State 
Secretariat  for  International  Financial  Matters  expressly  stated  that  "In  order  to  ensure 
the  competitiveness  of  Swiss  market  players  and  market  access  in  the  EU,  regulation 
equivalent  to  that  of  the  EU  is  to  be  sought  in  [trading  and  financial  market 
infrastructure reforms]. 

Switzerland  is,  therefore,  in  the  phase  of  preparation  of  its  upcoming  reforms  and  the 
Swiss regulatory framework is still to be defined. 

•  Japan 

The Japanese FSA promulgated in July 2012 a cabinet office ordinance which took effect 
on  1  November  2012  with  respect  to  reforms  regarding  mandatory  use  of  central 
counterparties (clearing obligation) and trade repositories (reporting obligation). 

Reporting obligation 

Financial  institutions  registered  under  the  Financial  Instruments  Exchange  Act  (FIEA) 
will  be  required  to  report  to  trade  repositories  OTC  derivatives  transactions  for  which 
trade  repositories  services  are  available,  such  as  credit  derivatives  transactions  and 
forward,  option  and  swap  transactions  in  relation  to  interest  rate,  foreign  exchange  and 
equity.  Applicable  transactions  will  be  reviewed  for  expansion  after  November  2012, 
taking into account further developments in market infrastructure. 

Clearing obligation 

Japan envisages a phased-in implementation. As described in the FSB's fourth progress 
report  on  the  implementation  of  OTC  derivatives  reforms,  starting  in  November  2012, 
certain  standardized  credit  default  swaps5  and  interest  rate  swaps6  will  be  subject  to 
mandatory  clearing.  The  scope  of  products  subject  to  mandatory  clearing  will  then  be 

4  The  first  group  of  entities  that  will  be  required  to  clear  within  90  days  of  the  CFTC  issuing  a  final 
clearing determination includes swap dealers, major swap participants, and private funds that enter into 
more than 200 swaps per month. The second group, which must comply within 180 days, includes all 
other  private  funds,  commodity  pools  and  others  involved  in  financial  activities.  The  third  group, 
which is allowed 270 days to comply with the clearing requirement, includes any persons not captured 
by the first two groups, such as clearing for third-party subaccounts and retirement plans. 
Index-based CDS (i.e. iTraxx Japan Index Series) 
Plain-vanilla JPY denominated IRS with reference to LIBOR 

5 
6 

5 

 
                                                 
expanded to other OTC derivatives7 taking into consideration elements such as the size of 
transactions and degree of standardisation. 

Also, in an initial stage, the scope of the mandatory clearing requirements will be applied 
only  to  transactions  in  OTC  derivatives  concluded  between  major  domestic  financial 
institutions8.  The  clearing  requirements  could  be  expanded  in  the  future  to  transactions 
between  these  domestic  financial  institutions  and  foreign  financial  institutions  (not 
registered under FIEA), taking into account international discussions currently underway 
on cross-border regulation. 

Foreign central banks are, therefore, not in scope of the reporting and clearing obligations 
imposed by OTC derivatives markets reforms in Japan. 

•  Australia 

On 12 September 2012, the Australian Government introduced a bill into the Parliament 
(the  Corporations  Legislation  Amendment  (Derivatives  Transaction)  Bill  2012) 
providing  a  legislative  framework  to  implement  OTC  derivatives  markets  reforms  in 
Australia. The framework proposes a flexible approach, enabling the Minister to decide 
whether  mandatory  clearing,  reporting  or  organised  platform  trading  should  apply  to 
certain classes of OTC derivatives. 

The bill has been passed by the House of Representatives and is awaiting consideration 
by the Senate. The legislation should be in place by end 2012. 

Implementing regulations and rules would be required before any mandatory obligations 
are  imposed.  Under  the  framework,  the  Australian  Securities  and  Investments 
Commission  (ASIC) will be authorised to issue implementing  rules. The Reserve Bank 
of  Australia,  the  Australian  Prudential  Regulation  Authority  and  ASIC  are  entitled  to 
give advice to the Minister about whether mandatory obligations should apply to specific 
classes of OTC derivatives. 

In  Australia,  the  legislative  framework  for  the  implementation  of  OTC  derivatives 
reforms  has  therefore  been  proposed  but  has  not  yet  been  adopted.  Implementing  rules 
will also need to be further defined. 

•  Canada 

In Canada, the legislative framework for implementing OTC derivatives markets reforms 
is not yet fully defined. The largest provinces in terms of OTC derivatives and others are 
currently  working  on  getting  the  legislation  in  place9.  The  Canadian  Securities 
Administrators  (CSA)  is  working  on  drafting  the  implementing  regulation  or  rules 
associated with the legislation. 

7 

8 

JPY denominated IRS with reference to TIBOR, foreign currency (US$ and euro) denominated IRS, 
and CDS referencing a Japanese company. 
Products subject to mandatory clearing between large domestic financial institutions registered under 
the Financial Instruments Exchange Act (FIEA) that are members of the clearing organisation (Japan 
Securities Clearing Corporation, JSCC) or that are subsidiaries of a parent company that is a member 
of JSCC. 

9  The powers for securities regulation belong to the provinces in Canada. 

6 

 
                                                 
Reporting 

The CSA published a consultation paper on trade repositories to inform the rules making 
process.  Ontario  and  Quebec  have  already  amended  legislation  to  support  reporting  to 
trade repositories and regulatory access to data and most provinces are assessing whether 
legislative  changes  may  be  required.  The  CSA  will  consult  on  rules  for  trade  reporting 
and trade repositories, which should be finalised early 2013. Requirements are scheduled 
to be implemented in the first semester of 2013. 

Clearing 

Canadian  Securities  Administrators  (CSA)  conducted  a  consultation  on  clearing  which 
closed in Q3 2012 and will inform the upcoming rule making. Provincial regulation for 
central  clearing  is  expected  to  be  in  place  in  the  provinces  where  the  majority  of  OTC 
derivatives  are  booked  by  mid-2013.  Further  work  will,  however,  be  required  to 
harmonise  the  legislation  across  all  provinces.  The  CSA  is  also  working  on  drafting 
implementing  rules  for  central  clearing,  which  are  expected  to  be  published  for 
consultation early 2013. 

•  Hong Kong 

Hong  Kong  proposed  its  regulatory  regime  for  OTC  derivatives  markets  reforms, 
following the conclusion of its consultation process. The legislative process to adopt the 
new regulatory regime is still under way. 

The  Hong  Kong  Monetary  Authority  (HKMA) and Securities and Futures Commission 
of Hong Kong (SFC) conducted a public consultation in October 2011 on their proposed 
OTC  derivatives  regulatory  regime  for  Hong  Kong,  including  mandatory  clearing  and 
reporting.  Following  the  consultation  process,  HKMA  and  SFC  released  in  July  2012 
their joint conclusions. The legislative proposal has not been yet finalised. 

Reporting 

The  regulatory  proposal  for  mandatory  reporting  has  been  reviewed  by  a  panel 
committee of the Legislative Council and is now under legislative drafting. The aim is to 
introduce  the  required legislative  amendments  before  the  legislature  in  early  2013.  The 
approach  will  be  phased-in,  beginning  with  interest  rate  swaps  and  non-deliverable 
forwards. 

The regulatory framework proposed in Hong Kong provides for location requirements for 
reporting  to  trade  repositories:  all  derivatives  transactions  that  have  a  bearing  on  Hong 
Kong’s financial markets would be required to be reported to the local trade repository 
developed by HKMA trade repository. 

Clearing 

The  consultation  conclusions  limit  clearing  obligations  to  transactions  booked  in  Hong 
Kong.  Taking  into  consideration  the  responses  received  from  the  consultation,  the 
regulators  have  started  working  on  a  legislative  proposal  to  be  submitted  to  the 
Legislative Council, with the aim of introducing the required legislative amendments in 
early 2013. In the meantime, an interim legislative proposal exists to support voluntary 
clearing of certain derivatives transactions through local CCPs recognized by the SFC. 

7 

 
4. 

INTERNATIONAL  TREATMENT  OF  CENTRAL  BANKS  AND  DEBT  MANAGEMENT 
OFFICES IN THESE JURISDICTIONS 

•  USA 

The Dodd-Frank Act excludes swaps of a counterparty which is a Federal Reserve Bank, 
the Federal Government or a Federal agency that is expressly backed by the full faith and 
credit  of  the  United  States10.  Other  central  banks,  i.e.  foreign  central  banks,  are  not 
included in this exclusion. 

The  CFTC  and  SEC  have  considered  the  application  of  each  of  the  requirements  laid 
down in the Dodd-Frank Act and sought to limit their effects to foreign central banks on 
a case-by-case basis when developing the implementing rules, as described below. 

Assuming  that  public  bodies  charged  with  or  intervening  in  the  management  of  public 
debt  are  part  of  the  government,  foreign  central  banks  and  foreign  public  debt 
management  bodies  are  covered  by  same  regime.  In  other  words,  as  described  below, 
public  bodies  managing  public  debt  will  also  benefit  from  an  exemption  from  the 
clearing and reporting obligations. 

Registration requirements 

As  a  general  matter,  the  CFTC  has  exempted  a  central  bank  from  registration 
requirements that might otherwise be applicable if such an institution were deemed to fall 
within the definition of a swap dealer or major swap participant. 

In  its  final  joint  rulemaking11  with  the  SEC,  the  CFTC  and  SEC  defined  key  terms  set 
forth  in  the  DFA,  including  definitions  of  the  term  “swap  dealers,”  “major  swap 
participants,” and an “eligible contract participant.” 

In the CFTC’s federal register release, the Commission noted that while foreign entities 
are not necessarily immune from US jurisdiction for commercial activities undertaken in 
US markets, there is nothing in the relevant provisions of the DFA or legislative history 
to indicate that Congress, in passing the DFA, intended to deviate from the traditions of 
the  international  system  by  including  foreign  governments,  foreign  central  banks  and 
international  financial  institutions  within  the  definitions  of  the  term  “swap  dealer  or 
“major swap participant.” 

Accordingly, the CFTC interpreted that such foreign governments, foreign central banks 
and international financial institutions should not be required to register as swap dealers 
or major swap participants with the CFTC12. 

10   DFA,  Sec  721-47(B)  on  SWAP-Exclusions:  "The  term  'swap'  does  not  include  […]:  (ix)  any 
agreement, contract, or transaction a counterparty of which is a Federal Reserve bank, the Federal 
Government,  or  a  Federal  agency  that  is  expressly  backed  by  the  full  faith  and  credit  of  the  United 
States;[…] 

11   See 77 Fed. Reg. 30596 (May 23, 2012) 
12  See 77 Fed. Reg. 30596, 30693. 

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Reporting obligation 

As they are exempt from registration requirements, foreign central banks are also exempt 
from  the  reporting  obligation.  However,  a  US  counterparty  entering  into  a  transaction 
with a foreign central bank would still be subject to the reporting obligation under DFA. 
For example, in the event  that  a  European central bank enters into  a transaction with  a 
CFTC-registered  swap  dealer,  that  swap  dealer  would  still  be  subject  to  recordkeeping 
and reporting requirements applicable to the swap, even though the transaction would not 
be subject to mandatory clearing requirements. 

This  situation  is  consistent  with  EMIR  (where  the  counterparty  to  a  central  bank's 
transaction  still  has  to  report),  but  creates  a  differentiated  approach  between  US  and 
foreign central banks under the DFA. Indeed, transactions with US central banks are fully 
exempted from DFA and so do not have to be reported, while transactions with foreign 
central banks will have to be reported by the US counterparty. 

Clearing obligation 

In a separate rulemaking13, the CFTC has addressed various exceptions to the otherwise 
applicable  requirement  that  all  swaps  must  be  submitted  to  a  CCP  registered  with  the 
CFTC  for  clearing  and  has  interpreted  that  a  foreign  central  bank  is  exempt  from  any 
mandatory clearing requirements that might otherwise apply. 

In  reaching  a  determination  that  foreign  governments,  foreign  central  banks  and 
international financial institutions should not be subject to the DFA clearing requirement 
promulgated  by  Congress,  the  CFTC  cited  similar  considerations  that  it  had  earlier 
discussed  when  granting  the  registration  exemption  presented  above.  In  particular,  the 
CFTC noted14 that it is assumed that “legislators take account of the legitimate sovereign 
interests  of  other  nations  when  they  write  American  laws”.  In  this  regard,  the  CFTC 
noted that there is nothing in the DFA to suggest that Congress intended to deviate from 
these  traditions  when  promulgating  the  clearing  requirements  in  the  Act,  and  given 
considerations  of  comity,  the  Commission  stated15  that  foreign  governments,  central 
banks  and  international  financial  institutions  should  not  be  subject  to  the  clearing 
mandate set forth in the DFA. 

•  Switzerland 

There is no mandatory clearing or trade reporting regime in place in Switzerland for OTC 
derivatives  transactions.  Consequently,  OTC  derivatives  executed  with  the  Swiss 
National  Bank  or  with  any  other  central  bank  or  with  domestic  or  non-domestic  public 
bodies charged with or intervening in the management of the public debt, do not need to 
be  centrally  cleared  or  reported  under  Swiss  law.  Similarly,  no  bilateral  risk  mitigation 
techniques would apply to transactions involving a central bank. 

Switzerland  has  publicly  announced  that  it  intends  to  closely  follow  EMIR's  approach 
and aims at adopting an equivalent regulation. Foreign central banks under Swiss law are 

13  See 77 Fed. Reg. 42560 (July 19, 2012). 
14  See 77 Fed. Reg. 42560, 42562.  
15  See 77 Fed. Reg. 42560, 42562. 

9 

 
                                                 
therefore  likely  to  benefit  from  an  equivalent  treatment  as  foreign  central  banks  under 
EMIR. 

•  Japan 

In  Japan,  the  Cabinet  Office  Order  that  came  into  effect  on  1 November 2012  exempts 
transactions  with  foreign  central  banks  and  public  debt  management  bodies  from  the 
clearing and reporting obligations. 

•  Hong Kong 

The  treatment  of  central  banks  is  discussed  in  the  joint  HKMA-SFC  conclusions 
published in July 2012 following the consultation process (see above). These conclusions 
propose exemptions from the clearing and reporting obligations for central banks and for 
public  entities  managing  public  debt  from  jurisdictions  that  provide  reciprocal 
arrangement for Hong Kong central banks and debt management offices. 

Reporting obligation 

According to the currently proposed approach, foreign central banks and public entities 
managing  public  debt  would  be  exempted  from  the  reporting  obligation.  The  joint 
HKMA-SFC  conclusions  published  in  July  2012  conclude  that:  “with  respect  to 
exemptions  for  central  banks,  etc.,  we  have  considered  regulations  proposed  in  other 
financial  centres.  In  view  of  these,  we  are  prepared  to  consider  incorporating  limited 
exemptions in respect of public sector entities involved in the management of public debt 
from  the  mandatory  reporting  obligation  in  order  to  avoid  affecting  their  powers  to 
stabilise  the  market,  as  and  when  required.  These  include  central  banks,  monetary 
authorities  or  public  bodies  charged  with  the  management  of  public  debt  and  reserves 
and  the  maintenance  of  market  stability,  as  well  as  global  institutions  such  as  the 
International  Monetary  Fund,  the  Bank  for  International  Settlements,  etc.  Specifically, 
our current thinking is that – (1) all such global institutions should be exempted in full 
from the reporting obligation, (2) for central banks, authorities and bodies, criteria such 
as  reciprocity  will  be  taken  into  account  when  determining  whether  to  grant  reporting 
exemptions”16. 

However,  counterparties  subject  to  Hong  Kong  regulatory  regime  entering  into  a 
transaction with a foreign central bank would still be subject to the reporting obligation. 
This approach is consistent with EMIR. 

Clearing obligation 

Similarly, according to Hong Kong current proposed approach, foreign central banks and 
public  entities  managing  public  debt  would  be  exempted  from  the  clearing  obligation. 
The  joint  HKMA-SFC  conclusions  published  in  July  2012  conclude  that:  “We  have 
carefully considered the feedback on blanket exemptions from clearing, and see merit in 
providing  for  some  of  the  exemptions  sought.  We  note  also  that,  as  more  jurisdictions 
provide  details  of  their  proposed  OTC  derivatives  regulations,  a  clearer  trend  is 
emerging  of  the  types  of  blanket  exemptions  that  may  be  introduced  in  major 
jurisdictions  like  the  US  and  the  EU.  In  view  of  this,  we  are  reconsidering  whether  to 

16  Paragraph 127,  

http://www.hkma.gov.hk/media/eng/doc/key-information/press-release/2012/20120711e3a34.pdf) 

10 

 
                                                 
grant clearing exemptions, and if so to what extent. In particular – (1) We are prepared 
to consider granting clearing exemptions in respect of transactions with certain central 
banks,  monetary  authorities  or  public  bodies  charged  with  the  management  of  public 
debt and reserves and the maintenance of market stability, as well as global institutions 
such  as  the  International  Monetary  Fund,  the  Bank  for  International  Settlements,  etc. 
Criteria  such  as  reciprocity  will  be  taken  into  account  when  determining  whether  to 
grant exemption for central banks, monetary authorities and public bodies.”17 

Hong  Kong  will  continue  to  monitor  international  standards  and  practices  to  determine 
the details regarding such exemption, which will be consulted on in Q1 2013. 

•  Australia 

The Derivatives Transaction Bill, as currently proposed in Australia, does not carve in or 
carve out any entities or persons from mandatory obligations on trade reporting or central 
clearing. 

When  the  Minister  makes  a  determination  that  a  mandatory  obligation  will  apply  to 
specified  classes  of  OTC  transactions,  he  has  the  discretion,  at  that  point,  to  limit  the 
entities  the  mandatory  obligation  could  apply  to18.  Subject  to  any  limits  set  under 
regulations, Australian Securities and Investments Commission (ASIC) will be expected 
to  make  rules  that  specify  the  details  of  how  participants  can  comply  with  mandatory 
obligations. The rules can also provide exemptions. The ultimate scope of any mandatory 
obligation would, therefore, be considered as part of upcoming consultation processes for 
the Minister’s determinations, regulations or ASIC’s rules. 

From  exchanges  with  staff,  the  preliminary  thinking  at  the  staff  level  indicates  that 
central  banks/government  entities  would  probably  be  carved  out  of  mandatory  clearing 
and reporting obligations. However, no formal decision has been made yet. 

This  thinking  and  approach  was  noted  in  the  April  2012  consultation,  which  provided 
that19: “The benefits of any central clearing rules must be balanced against their costs. A 
major factor in determining the costs (and practicalities) of a mandatory central clearing 
regime  is  the  nature  of  the  parties  which  may  potentially  be  subject  to  obligations 

17  Paragraph 167,  

http://www.hkma.gov.hk/media/eng/doc/key-information/press-release/2012/20120711e3a34.pdf) 

18  Section 901-D of the OTC derivatives bill 

(http://www.treasury.gov.au/ConsultationsandReviews/Submissions/2012/Derivative-Transactions) 
901D - Regulations may limit the persons on whom requirements may be imposed 
The regulations may provide that the derivative transaction rules: (a) cannot impose requirements (or 
certain kinds of requirements) on certain classes of persons; or (b) can only impose requirements (or 
certain kinds of requirements) on certain classes of persons in certain circumstances. 
Note: A class of persons may be described by reference to any matter, including (for example): (a) the 
volume  of  derivative  transactions  entered  into  by  persons over  a  period; or (b)  the  characteristics  or 
nature of persons or of their businesses; or (c) the place of residence or business of persons. 
19   See title ‘Entities’ of the Consultation Paper (Implementation of a framework for Australia’s G20 

over‐the‐counter derivatives commitments, page 17) – April 2012 

http://www.treasury.gov.au/~/media/Treasury/Consultations%20and%20Reviews/2012/Over%20the%
20counter%20derivatives%20commitments%20consultation%20paper/Key%20Documents/PDF/OTC
%20Framework%20Implementation_pdf.ashx 

11 

 
                                                 
imposed  under  the  regime.  It  may  therefore  be  appropriate  to  only  apply  the  clearing 
obligation  to  some  entities.    (...)  One  option  may  be  to  exclude  public  entities,  such  as 
central  banks,  debt  offices,  supra‐national  multilateral  development  banks  and  entities 
such as the International Monetary Fund (IMF).”  

•  Canada 

Rules are not yet finalised. Exchanges at staff level indicate that some type of exemption 
for Bank of Canada (or possibly more generally, central banks) is under consideration for 
both the clearing and reporting obligations. Consideration may also be given to possible 
exemptions  for  the  Government  of  Canada  and  other  public  bodies.  Work  on  these 
exemptions is, however, not yet completed.  

It is, therefore, too early to conclude on the treatment of central banks and public entities 
managing public debt under the forthcoming Canadian regulatory regime. 

•  Summary table 

EU 
US 
Japan 
Switzerland 
Australia 
Canada 
Hong Kong 

Clearing Obligation 
Exempted 
Exempted 
Exempted 
Will be exempted 
Exemption envisaged 
Exemption to be considered 
Exemption envisaged  

Reporting Obligation 
Exempted 
Exempted 
Exempted 
Will be exempted 
Exemption envisaged 
Exemption to be considered 
Exemption envisaged  

International treatment of foreign central banks and public entities managing public debt 

5.  CONCLUSIONS 

In the light of the above, central banks and public bodies charged with or intervening in 
the management of public debt will not be subject to the clearing and reporting obligation 
under  the  US  and  Japanese  and  upcoming  Swiss  regulatory  frameworks.  They  are  also 
likely  to  be  exempted  under  the  forthcoming  Australian  and  Hong  Kong  legal 
frameworks. Exemptions under the Canadian regime can also be expected. 

Adding foreign central banks20 to the list of exempted entities under EMIR will prevent 
interfering  with  the  conduct  of  their  monetary  responsibilities  and  promote  a  level-
playing  field  in  the  application  of  OTC  derivatives  reforms  with  regard  to  transactions 
with central banks across these jurisdictions, as far as the central clearing and reporting 
obligations are concerned. This will also contribute to greater international coherence and 
consistency. 

The  exercise  of  monetary  responsibilities  and  the  management  of  sovereign  debt  have 
joint  impacts  on  the  functioning  of  interest  rate  markets  which  must  be  coordinated  to 
ensure  that  these  two  functions  are  performed  efficiently.  As  EMIR  excludes  from  its 
scope  EU  central  banks  and  other  EU  public  bodies  managing  debt  in  order  to  avoid 
limiting  their  power  to  perform  their  tasks  of  common  interest,  applying  different 

20  The  central  banks  in  all  the  jurisdictions  analysed  in  this  report  perform  functions  related  to  their 

monetary responsibilities. 

12 

 
 
                                                 
regimes to these two functions when they are exercised by third-country entities would 
be  detrimental  to  their  respective  effectiveness.  In  order  to  ensure  that  third  country 
central banks and other public bodies charged with or intervening in the management of 
the  public  debt  continue  to  perform  adequately  their  tasks,  third-country  public  bodies 
charged with or intervening in the management of the public debt should also be included 
in the delegated acts adopted under Article 1(6). 

With  regard  to  risk-mitigation  techniques  for  trades  that  are  not  centrally  cleared  in  a 
CCP, the global picture is still uncertain. An international working group21 is expected to 
present  its  recommendations  for  the  G20  jurisdictions  end  2012.  Its  latest  draft  text 
recommends  exempting  transactions  with  central  banks  from  the  scope  of  margin 
requirements22. This is in line with the EU rules (EMIR). The Commission will pay close 
attention  to  the  development  of  the  WGMR  report  and  its  implementation  in  other 
jurisdictions. 

The  comparative  analysis  in  this  report  is  by  no  means  exhaustive.  It  is  also  based  on 
some  third-countries'  legislation  that  is  non-final.  The  report  will  need  to  be  updated 
regularly as the reform process advances in these and other G20 jurisdictions.  

At this stage, the Commission concludes a delegated act is required to amend Article 1(4) 
of EMIR and to exempt the central banks and public bodies charged with or intervening 
in the management of public debt from Japan and the United States, which are the two 
jurisdictions with final rules on OTC derivatives in place. 

As Australia, Canada, Hong Kong and Switzerland proceed with finalising their rules, the 
Commission  will  monitor  and  report  on  the  latest  developments  with  a  view  to  also 
exempting their respective central banks and debt management offices on the basis of the 
rules  that  are  currently  proposed  in  those  jurisdictions.  In  order  to  ensure  that  third 
country  central  banks  and  other  public  bodies  charged  with  or  intervening  in  the 
management  of  the  public  debt  continue  to  perform  adequately  their  tasks,  other 
countries will also be considered in the future, as needed. Further amendments of Article 
1(4)  of  EMIR  to  include  countries  not  listed  in  this  first  report  may,  therefore,  be 
expected. 

In the immediate future, no market disruption will be imposed on third countries that are 
not included in the first delegated act, since the obligations related to central clearing and 
risk  mitigation  techniques  for  uncleared  trades  have  not  yet  entered  into  force  in  the 
Union. The European Commission will pay close attention to the timing of the entry into 
force of these obligations with the exemptions of third country central banks. 

21  WGMR- Working Group on Margins Requirements. 
22  http://www.bis.org/press/p120706.htm,  Margin  requirements  for  non-centrally  cleared  derivatives, 

BCBS and IOSCO, 6 July 2012  

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