REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND THE COUNCIL on the International Treatment of Central Banks and Public Entities Managing Public Debt with regard to OTC Derivatives Transactions
Date: 2017-03-02
Institutions: Directorate-General for Financial Stability, Financial Services and Capital Markets Union, European Commission
Subjects: Australia, Canada, Hong Kong, Mexico, Singapore, Switzerland, central bank, financial legislation, financial transaction, public debt

1.   

EN 

   EN 

   EUROPEAN COMMISSION  Brussels, 2.3.2017  COM(2017) 104 final   REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND THE COUNCIL on the International Treatment of Central Banks and Public Entities Managing Public Debt with regard to OTC Derivatives Transactions  
 
1.  INTRODUCTION 

The Regulation on OTC derivatives, central counterparties and trade repositories (EMIR) of 4 
July  2012  requires,  inter  alia,  the  central  clearing  of  all  standardised  OTC  derivatives 
contracts, 
the 
implementation of risk-mitigation techniques for those trades which are not centrally cleared. 

the  reporting  of  all  derivatives  contracts 

trade  repositories  and 

to 

According  to  Article  1(4)  of  EMIR,  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 these obligations. 

Under Article 1(6) of EMIR, the European Commission is  empowered  to  amend the list  of 
exempted entities by way of a Delegated Act if it concludes, after analysing the international 
treatment of central banks and of public bodies managing public debt in other jurisdictions’ 
legal frameworks and informing the European Parliament and the Council of the results, that 
the exemption of the monetary responsibilities of those third-country central banks from the 
clearing and reporting obligation is necessary. 

2.  THE COMMISSION'S FIRST ASSESSMENT 

The  Commission  carried  out  its  first  review  of  the  OTC  derivatives  legal  frameworks  in 
Japan,  Switzerland,  the  United  States,  Australia,  Canada,  and  Hong  Kong  in  2013.  On  22 
March 2013, the Commission adopted a report1 concluding that the legislative frameworks of 
Japan  and the  United  States  fulfilled  the  conditions  for  the central  banks  and  public  bodies 
responsible for the management of the public debt in these two jurisdictions to be exempted 
from  certain  EMIR  requirements.  They  were  subsequently  added  to  the  list  of  exempted 
entities  in  Article  1(4)  of  EMIR  by  way  of  Commission  Delegated  Regulation  (EU)  No 
1002/20132.  

The  legislative  frameworks  in  the  four  remaining  jurisdictions  were  deemed  to  have  been 
insufficiently  advanced  for  their  central  banks  and  public  debt  management  bodies  to  be 
included in the list of exempted entities. However, the report concluded that the Commission 
would "monitor and report on the latest developments" once their rules were finalised. 

3.  THE CURRENT ASSESSMENT 

The current assessment includes the four jurisdictions included in the first assessment but not 
recommended for an  exemption at that time as  well as two other jurisdictions (Mexico and 
Singapore) which requested an assessment.  

The  assessment  is  based  on  information  gathered  directly  from  the  jurisdictions  under 
assessment, and looks at two specific aspects of these frameworks: 

i) 

progress  in  the  implementation  of  OTC  derivative  market  reforms  as  agreed  at  the 
2009 G20 summit in Pittsburgh;  

ii) 

the  treatment  of  central  banks  and  public  bodies  charged  with  or  intervening  in  the 

1 COM(2013) 158 of 22.3.2013 
2 COMMISSION DELEGATED REGULATION (EU) No 1002/2013 of 12 July 2013 amending Regulation (EU) No 648/2012 of 
the European Parliament and of the Council on OTC derivatives, central counterparties and trade repositories with regard to the 
list of exempted entities (OJ L 279, 19.10.2013, p. 2) 

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management  of  the  public  debt  within  the  relevant  legal  frameworks  in  these 
jurisdictions  as  well  as  the  risk-management  standards  applicable  to  the  derivative 
transactions entered into by these entities. 

The  analysis  shows  that  significant  progress  has  been  made  in  all  jurisdictions  under 
assessment  with  regard  to  the  adoption  and  implementation  of  OTC  derivatives  reforms. 
Moreover, all six have addressed the issue of the applicability of the various requirements to 
central  banks  and  public  bodies  charged  with  or  intervening  in  the  management  of  public 
debt.  

4.  PROGRESS IN OF OTC DERIVATIVES MARKETS REFORMS 

4.1. Australia 

The  implementation  of  mandatory  clearing,  reporting  or  organised  platform  trading  in 
Australia  is  a  two  stage  process  with,  first,  a  decision  by  the  relevant  Minister  on  whether 
these  requirements  should  apply  to  certain  classes  of  OTC  derivatives,  and  second, 
implementing  regulations  and  rules  issued  by  the  Australian  Securities  and  Investments 
Commission  (ASIC).  Risk  mitigation  techniques  for  non-centrally  cleared  OTC  derivatives 
are being implemented by the Australian Prudential Regulation Authority (APRA). 

Clearing obligation 

Australian  regulations  implementing  mandatory  central  clearing  are  set  out  in  the 
Corporations  Amendment  (Central  Clearing  and  Single-Sided  Reporting)  Regulation  2015. 
The  regulation  implements  central  clearing  of  prescribed  classes  of  OTC  interest  rate 
derivatives for a small number of major domestic and foreign banks that act as dealers in the 
Australian  OTC  derivatives  market.  In  December  2015,  the  ASIC  Derivative  Transaction 
Rules (Clearing) 2015 introduced mandatory central clearing of OTC interest rate derivatives 
denominated in several leading currencies. The clearing obligations started in April 2016. 

Reporting obligation 

The  ASIC  Derivative  Transaction  Rules  (Reporting)  2013,  amended  in  February  2015, 
introduce  the  obligation  to  report  OTC  derivative  transactions.  The  reporting  obligation 
currently covers all derivative asset classes and is in place since December 2015. 

Risk-mitigation techniques 

The  prudential  standard  requiring  the  use  of  risk-mitigation  techniques  for  non-centrally 
cleared  OTC  derivatives  was  released  by  APRA  in  October  2016.  The  rule  mandates  the 
application of several risk-mitigation techniques: rapid confirmation of transactions, portfolio 
reconciliation,  portfolio  compression,  dispute  resolutions  procedures,  and  the  existence  of 
processes for determining valuations. A start date has not yet been set. 

4.2. Canada 

The implementation of OTC derivatives markets reforms has two parallel strands. The Office 
of  the  Superintendent  of  Financial  Institutions  (OSFI),  Canada’s  prudential  regulator,  sets 
broad  requirements  for  federally  regulated  financial  institutions  (FRFIs)  by  means  of 
guidelines.  The  provinces  and  territories  are  then  responsible  for  market  regulation  in  their 
jurisdictions.  The  Canadian  Securities  Administrators  (CSA),  an  umbrella 
specific 

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organisation of Canada’s provincial and territorial securities regulators, is responsible for the 
coordination  and  harmonisation  of  Canadian  capital  markets  regulation.  It  develops 
regulations which are then promulgated and implemented by the provinces. 

Clearing obligation 

The clearing obligation is being implemented by all provincial securities regulators through a 
Proposed  National  Instrument  94-101  Mandatory  Central  Counterparty  Clearing  of 
Derivatives (Proposed NI 94-101) being developed by the CSA and, at the federal level, by 
OSFI  through  its  Guideline  B-7:  Derivatives  Sound  Practices,  which  came  into  effect  in 
December  2014.  According  to  Guideline  B-7,  FRFIs  are  expected  to  centrally  clear 
standardised  derivatives  where  practical.  Proposed  NI  94-101  provides  for  the  mandatory 
central clearing of certain OTC derivatives and lists the counterparties to which the clearing 
obligation will apply. The final rule should be adopted in early 2017. 

Reporting obligation 

implemented 

The  reporting  obligation  is  being  implemented  at  the  provincial  level  through  regulations 
enacted  by  each  provincial  securities  regulator.  There  are  specific  regulations  in  Ontario, 
Quebec and Manitoba; in all other provinces (MI Jurisdictions), the reporting obligation has 
been 
through  Multilateral  Instrument  96-101  Trade  Repositories  and 
Derivatives  Data  Reporting  (MI  96-101).  Trade  reporting  rules  are  fully  in  effect  for  all 
provinces since November 2016. The provincial and multilateral instruments are substantially 
harmonised with respect to the reporting obligation, and require the reporting of transactions 
which  involve  at  least  one  local  counterparty.  At  the  federal  level,  Guideline  B-7  requires 
FRFIs to report transactions pursuant to the reporting rules in effect in the province in which 
their head office or principal place of business is located. 

Risk mitigation techniques 

At  the  federal  level,  OSFI  Guideline  B-7  outlines  the  risk  mitigation  techniques  for  non-
centrally  cleared  derivatives  as  they  apply  to  FRFIs.  In  addition,  OSFI  Guideline  E-22 
Margin  Requirements  for  Non-Centrally  Cleared  Derivatives,  which  came  into  effect  in 
September  2016,  addresses  issues  such  as  dispute  resolution  and  valuation  methodologies 
with  respect to  margin  requirements for non-centrally cleared derivatives. At the provincial 
level, the CSA is currently developing a rule on dealer registration, which would impose risk 
mitigation techniques on derivatives market participants. The rule is expected to be published 
for comment in 2017 and enter into force in the first half of 2018. 

4.3. Hong Kong 

Hong  Kong  has  a  two-stage  process  for  the  implementation  of  OTC  derivative  market 
reforms. A regulatory framework is put in place by way of primary legislation, specifically 
the  Securities  and  Futures  (Amendment)  Ordinance  2014,  which  amends  the  original 
Securities and Futures Ordinance (SFO) of 2002. This  is  followed by subsidiary legislation 
(i.e.  rules)  setting  out  detailed  requirements  for  the  reporting,  clearing,  and  trading 
obligations,  made  by  the  Securities  and  Futures  Commission  (SFC)  with  the  Hong  Kong 
Monetary Authority’s (HKMA) consent, and after consultation with the Financial Secretary. 

Clearing obligation 

The  Amendment  Ordinance  introduces  a  mandatory  obligation  for  the  clearing  of  OTC 

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derivatives  transactions.  The  empowering  provisions  require  prescribed  persons'  to  clear 
certain OTC derivative transactions through a designated central counterparty in accordance 
with the clearing rules. The implementation of this obligation will take place in phases. The 
rules for the first phase came into force in September 2016. 

Reporting obligation 

The  Amendment  Ordinance  also  establishes  the  reporting  obligation.  A  prescribed  person 
must  report  relevant  OTC  derivative  transactions  to  the  HKMA  in  accordance  with 
requirements set out in the reporting rules. Phase 1 of reporting applies to a limited number of 
derivative types and to a slightly wider scope of persons than under the clearing obligation3. 
The rules for Phase 2 expand the product scope to cover all five asset classes and the range of 
information  to  be  reported  for  each  transaction.  The  scope  of  prescribed  persons  remains 
unchanged. Phase 2 reporting will start in July 2017. 

Risk mitigation techniques 

Two sets of risk-mitigation standards are foreseen in Hong Kong. The first, to be developed 
by  the  SFC,  will  apply  only  to  corporations  licensed  by  the  SFC  under  the  SFO  (LCs).  A 
consultation  on  the  draft  standards  will  be  held  in  2017.  The  second  was  developed  by  the 
HKMA  and  applies  to  institutions  authorised  by  the  HKMA  (AIs)  under  the  Banking 
Ordinance  (BO).  Implementation  of  these  standards  was  originally  targeted  to  start  in 
September 2016. However, in August 2016, the HKMA deferred the start of implementation 
given similar delays announced by other major jurisdictions. 

4.4. Mexico 

The  general  rules  on  OTC  derivative  transactions  are  set  out  in  the  'Rules  to  carry  out 
derivative  transactions'  (Circular  4/2012)  issued  by  the  Mexican  central  bank  (Banco  de 
México,  BdM)  in  March  2012,  with  subsequent  amendments.  Some  specific  rules  (e.g. 
incorporation of CCPs) were issued jointly by the BdM, the Ministry of Finance (SHCP) and 
the National Banking and Securities Commission (CNBV). 

Clearing obligation 

Circular 4/2012 establishes  that  standardised  derivative transactions between  local  banks  or 
brokerage firms and certain other entities (local and foreign) must be settled through clearing 
houses incorporated in accordance with rules issued jointly by the BdM, the SHCP, and the 
CNBV  or  through  foreign  institutions  acting  as  CCPs  and  recognised  by  the  BdM.  The 
clearing obligation is in force since April 2016 for transactions between local counterparties 
and  since  November  2016  for  transactions  executed  between  a  local  and  a  foreign 
counterparty.  Recent  amendments  to  Circular  4/2012  establish  criteria  to  determine  OTC 
products as standardised and therefore subject to central clearing requirements 

Reporting obligation 

Circular  4/2012  requires  local  banks,  brokerage  firms,  investment  funds,  and  sofomes 
(multiple-purpose  financial  institutions)  to  report  their  derivatives  transactions  to  the  BdM. 
Rules issued jointly by the BdM, SHCP and CNBV also require local CCPs to report to them 

3 The reporting obligation is extended to CCPs. 

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all contracts that they receive for clearing or any other transactions reported on a voluntary 
basis.  The  reporting  obligation  to  the  BdM  covers  all  asset  classes  and  both  OTC  and 
exchange-traded derivatives. However, only counterparties established in Mexico are legally 
obliged to ensure that the transaction is reported. 

Risk-mitigation techniques 

Since  April  2016,  local  banks,  brokerage  firms,  investment  funds,  general  deposit 
warehouses,  and  sofomes  are  required  to  put  in  place  at  least  the  following  risk  mitigation 
techniques  with  respect  to  non-centrally  cleared  OTC  derivative  transactions:  confirmation, 
daily valuation, reconciliation, mechanisms for dispute resolutions, and periodic assessments 
of  whether  to  engage  in  portfolio  compression.  Further  regulatory  requirements  for  local 
banks  and  brokerage  firms  regarding  risk  mitigation  of  their  transactions  are  set  out  in  the 
'Rules for Banks' and 'Rules for Brokerage Firms' issued by the CNBV.  

4.5. Singapore 

The  legislative  framework  for  OTC  derivatives  has  two  levels  of  legislation:  general 
framework  legislation  adopted  by  Parliament  and  specific  rules  adopted  by  the  Monetary 
Authority of Singapore (MAS).  

Clearing obligation 

Part  VIB  (Clearing  and  Derivatives  Contracts)  of  the  Securities  and  Futures  Act  (SFA),  in 
place  since  November  2012,  establishes  the  necessary  legislative  framework  for  mandating 
the clearing of derivatives. The MAS is currently in the process of finalising regulations for 
mandatory  clearing.  Adoption  is  planned  for  the  first  half  of  2017.  The  new  rules  would 
require the clearing of interest rate swaps denominated in Singapore and US dollars. 

Reporting obligation 

The  legislative  framework  for  the  reporting  obligation  was  put  in  place  by  Part  VIA 
(Reporting  of  Derivatives  Contracts)  of  the  SFA.  The  specific  rules  for  reporting  were 
subsequently  set  out  in  the  Securities  and  Futures  (Reporting  of  Derivatives  Contracts) 
Regulations 2013 (SF(RDC)R), which entered into force in October 2013. The rules require 
certain  ‘specified  persons’  to  report  interest  rate,  credit,  and  foreign  exchange  derivative 
transactions. The reporting requirement is fully in force since November 2015. 

Risk-mitigation techniques 

Rules on risk mitigation techniques are currently being finalised. The proposed rules require 
MAS-licensed  entities  dealing  in  OTC  derivative  contracts  to  apply  the  following  risk 
mitigation  techniques  in  respect  of  their  non-cleared  OTC  derivative  transactions: 
confirmation,  a  dispute  resolution  process,  daily  valuation,  portfolio  reconciliation  and 
portfolio  compression.  The  MAS  expects  the  risk  mitigation  requirements  to  become 
effective in 2017. 

4.6. Switzerland 

The  regulatory  framework  for  OTC  derivative  transactions  has  a  basic  legislative  act,  the 
Swiss  Financial  Market  Infrastructure  Act  (FMIA),  which  sets  out  market  conduct rules  on 
derivatives  trading,  and  subsequent  implementing  ordinances,  specifically  the  Swiss 

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Financial  Market  Infrastructure  Ordinance  (FMIO),  which  sets  out  the  specific  rules  and 
requirements in detail. Both the FMIA and FMIO entered into effect in January 2016.  

Clearing obligation 

The  FMIA  and  the  FMIO  provide  for  the  clearing  of  OTC  derivatives  transactions  and  set 
specific  rules related to  this obligation.  The clearing obligation in  principle  covers all OTC 
derivative  transactions,  with  certain  exemptions  for  some  (mostly  smaller)  counterparties. 
The obligation is being phased in depending on the types of contracts and counterparties.    

Reporting obligation 

The FMIA and the FMIO provide for an obligation to report all OTC derivative transactions 
and specify the relevant rules, including those describing which of the counterparties has the 
responsibility to report the transaction and what information is to be reported. 

Risk-mitigation techniques 

The rules concerning the use of risk mitigation techniques required for non-centrally cleared 
OTC  derivative  transactions  are  once  again  set  out  in  the  FMIA  and  the  FMIO.  The  Swiss 
regulatory  framework  includes requirements for the timely confirmation  of trades, portfolio 
reconciliation, portfolio compression, and procedures for dispute resolution.  

5.  INTERNATIONAL TREATMENT OF CENTRAL BANKS AND PUBLIC DEBT 

MANAGEMENT BODIES 

5.1. Australia 

Clearing obligation 

The 2015 Regulation states that clearing requirements in relation to a derivative transaction 
cannot  be  imposed  on  a  person  who  is  not  an  Australian  or  a  foreign  clearing  entity  in 
relation  to  the  transaction.  Furthermore,  the  regulation  prevents  the  derivative  transaction 
rules  from  imposing  clearing  requirements  on  a  range  of  foreign  public  entities  including, 
among others, central banks and government debt offices. 

Reporting obligation 

The Corporations Amendment (Derivatives Transactions) Regulation 2013 clarifies that the 
trade reporting obligation cannot be imposed on so-called ‘end users’. This essentially limits 
the  application  of  the  reporting  obligation to  Australian  deposit-taking  institutions,  licensed 
clearing and settlement facilities, financial service licensees, and persons providing financial 
services  relating  to  derivatives  to  wholesale  clients  in  Australia  under  a  specific  licensing 
exemption  granted  by  the  Australian  authorities.  As  such,  central  banks  and  public  debt 
management bodies are not subject to the requirement. 

Risk-mitigation techniques 

Under  the  recently  adopted  requirements,  risk  mitigation  techniques  apply  to  APRA-
regulated institutions in their transactions with covered counterparties. The definition of these 
institutions does not include any central banks or public bodies charged with or intervening in 
debt  management.  The  definition  of  a  'covered  counterparty'  in  turn  excludes  sovereigns, 

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central  banks,  multilateral  development  banks,  public  sector  entities,  and  the  Bank  for 
International Settlements. Therefore, risk mitigation requirements do not apply to any central 
banks or public debt management bodies. 

5.2. Canada 

Clearing obligation 

Guideline B-7 applies only to FRFIs. Since central banks and public debt management bodies 
do not fall within this definition, they are out of the scope of the OFSI rules on clearing. At 
provincial  level,  proposed  NI  94-101  explicitly  exempts  transactions  with  certain  Canadian 
institutions as well as foreign central banks and public bodies owned in whole or in part by a 
foreign  government  from  the  clearing  obligation.  It  is  expected  that  the  above  exemptions 
will remain in the final rule. 

Reporting obligation 

While  there  is  no  specific  exemption  foreseen  for  foreign  central  banks  or  public  debt 
management bodies from the trade reporting rules, these in effect require that trades between 
a  Canadian  counterparty  and  any  foreign  public  bodies  need  to  be  reported  only  by  the 
Canadian counterparty. Foreign central banks and all public bodies are therefore not subject 
to the reporting obligation. 

Risk mitigation techniques 

As  with  the  clearing  obligation,  the  OSFI  guidelines  apply  to  FRFIs  only.  As  such,  central 
banks and all public bodies are out of scope of the OSFI rules on risk mitigation techniques. 
At the provincial level, the registration rule is intended to apply only to derivatives dealers. 
As such, central banks and public debt management bodies are currently not within scope of 
this rule. While the registration rule is still being finalised, it is not expected that its scope of 
application will change. 

5.3. Hong Kong 

Clearing obligation 

The clearing obligation applies to interest rate swap (IRS) transactions among major dealers. 
These include, inside Hong Kong, AIs, money brokers approved by the HKMA under the BO 
(AMBs),  or  LCs  which  have  reached  a  minimum  clearing  threshold.  Major  dealers  outside 
Hong Kong are pre-identified in a list published by the SFC. The list includes entities such as 
clearing  members  of  the  largest  IRS  CCPs  in  a  number  of  markets  or  global  systemically 
important banks published by the Financial Stability Board. Since foreign central banks and 
public debt management bodies do not fall into any of these categories, they are outside the 
scope of the clearing obligation in Hong Kong. 

Reporting obligation 

Since Phase 1 of the reporting obligation applies to nearly the same scope of entities as the 
clearing obligation, foreign central banks and public debt management bodies are not subject 
to  the  reporting  obligation.  While  Phase  2  extends  the  application  of  the  reporting 
requirement to all five asset classes and increases the amount of information to be reported, it 
does  not  modify  the  scope  of  entities  covered  by  the  obligation.  As  such,  foreign  central 

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banks and public debt management bodies will remain exempt from the reporting obligation. 

Risk-mitigation techniques 

The risk mitigation standards to be defined by the SFC will, in general, apply only as long as 
OTC derivatives transactions are booked in SFC-licensed firms. Since, at present this is not 
the case, these standards will not be applicable for OTC derivative transactions. On the other 
hand, the framework developed by the HKMA applies to both domestic and foreign AIs with 
respect to  non-centrally cleared derivatives  transactions entered  into  with  a 'covered entity'. 
The definition of covered entities explicitly excludes central banks and eligible public sector 
entities (PSEs). As such, central banks will not be subject to the proposed framework as long 
as they have the status of a central bank in their respective jurisdiction. For PSEs, as long as 
an entity qualifies as a PSE for capital adequacy purposes in its jurisdiction (irrespective of 
whether or not it is charged with intervening in public debt management), it will be exempt 
from the risk mitigation requirements.      

5.4. Mexico 

Clearing obligation 

According to Circular 4/2012, only local banks and brokerage firms are required to clear their 
OTC  derivative  transactions  through  central  counterparties  when  trading  with  other  local 
banks  or  brokerage  firms,  local  or  foreign  institutional  investors,  or  foreign  banks  or 
brokerage  firms.  Central  banks  and  public  debt  management  bodies  are  therefore  exempt 
from the clearing obligation. 

Reporting obligation 

Circular  4/2012  states  that  where  a  derivative  transaction  is  entered  into  between  a  local 
counterparty  subject  to  the  reporting  requirement  and  an  entity  established  in  a  foreign 
jurisdiction,  only  the  Mexican  financial  entity  is  legally  obliged  to  report  a  derivative 
transaction  to  the  BdM.  Central  banks  and  public  debt  management  bodies  are  therefore 
exempted. 

Risk-mitigation techniques 

Given  that  the  risk  mitigation  techniques  defined  in  Circular  4/2012  apply  to  local  banks, 
brokerage firms, investment funds, general deposit warehouses, and sofomes, foreign central 
banks and public debt management bodies are exempt from the obligation to apply these risk 
mitigation techniques. 

5.5. Singapore 

Clearing obligation 

Under the draft regulations on mandatory clearing issued for consultation in 2015, the MAS 
has proposed that a range of international institutions, including foreign central banks and all 
public bodies be exempted from the clearing obligations. The MAS intends to maintain the 
proposed exemption in the final rules. 

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Reporting obligation 

Part II of the Securities and Futures Act together with the fourth Schedule of the SF(RDC)R 
explicitly  exempt  from  the  reporting  obligation  foreign  central  banks  and  all  public bodies, 
among a range of other international institutions. 

Risk-mitigation techniques 

The requirements on risk-mitigation techniques being developed by the MAS will only apply 
to  holders of a CMS license and banks licensed in  Singapore that  deal in OTC derivatives. 
Given  that  foreign  central  banks  and  public  debt  management  bodies  will  not  normally  be 
required to hold a CMS license, they will not be subject to the obligation. 

5.6. Switzerland 

Clearing obligation 

As  counterparties,  foreign  central  banks  and  foreign  public  debt  management  bodies  are 
outside the scope of the derivatives market conduct rules (and thereby the clearing obligation) 
as these bodies do not generally have a registered office in Switzerland. Moreover, derivative 
transactions  with  a  range  of  foreign  institutions,  including  central  banks  and  public  debt 
management  bodies  are  not  subject  to  the  FMIA  market  conduct  rules  for  derivatives  (and 
thus to the clearing obligation). 

Reporting obligation 

The  situation  for  the  reporting  obligation  is  analogous  to  that  for  the  clearing  obligation  – 
foreign  central  banks  and  public  debt  management  bodies  are  outside  of  the  scope  of  the 
derivatives  market  conduct  rules  as  they  do  not  generally  have  a  registered  office  in 
Switzerland. While derivative transactions between a Swiss counterparty within the scope of 
the  FMIA  rules  and  a  foreign  central  bank  or  foreign  public  debt  management  body  are 
subject to the FMIA reporting obligations, the obligation to report the transaction falls to the 
relevant  Swiss  counterparty  only.  In  addition,  the  Swiss  regulatory  framework  permits 
exempting  derivative  transactions  with  such  entities  from  the  reporting  obligation  entirely, 
subject to reciprocity.  

Risk-mitigation techniques 

With  regard  to  the  obligation  to  apply  risk  mitigation  techniques  to  non-centrally  cleared 
OTC derivative transactions, the situation is identical to that for the clearing obligation. As 
counterparties,  foreign  central  banks  and  public  debt  management  bodies  are  not  subject to 
the derivative market conduct rules. As regards derivative transactions with these entities, the 
FMIO provides for a specific exemption. 

6.  CONCLUSION 

The legislative frameworks implementing the OTC derivative reforms agreed in Pittsburgh in 
2009 are now full in place in Australia, Hong Kong, Mexico, and Switzerland, and will be so 
shortly  in  Canada  and  Singapore.  Furthermore,  in  all  of  these  jurisdictions,  the  legislative 
frameworks either do or will not apply to central banks and public debt management bodies. 

The  Commission  therefore  concludes  that  Article  1(4)  of  EMIR  should  be  amended  to 

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exempt from certain EMIR requirements the central banks and public bodies charged with or 
intervening in the management of public debt from Australia, Canada, Hong Kong, Mexico, 
Singapore and Switzerland. 

Exempting these entities will prevent EMIR requirements from interfering with the conduct 
of  their  monetary  responsibilities  and  other  tasks  of  common  interest,  and  will  promote  a 
level playing field in the application of OTC derivatives reforms with regard to transactions 
with  such  entities  in  these  jurisdictions.  It  will  also  contribute  to  greater  international 
coherence and consistency in OTC derivatives reform implementation.  

The comparative analysis presented in this report is not the last of its kind. The Commission 
will  monitor  developments  in  these  and  other  G20  jurisdictions  with  respect  to  the 
implementation  of  rules  on  OTC  derivative  transactions  and  will  update  the  report  as  the 
reform process in these jurisdictions advances, including by removing certain third countries 
from the list of exempted entities should the regulatory arrangements in those third countries 
no longer meet the conditions for an exemption. Further amendments of Article 1(4) of EMIR 
can therefore be expected. 

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