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Steady Progress in ACSDA PFMI Project Honored as an IADB ‘Regional Public Good’
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Now well under way, ACSDA's most ambitious member program to date, enabled by a partnership with the Inter-American Development Bank (IADB), is making steady progress. ACSDA President and CEO of Indeval Mexico, Roberto Gonzalez, expressed “our appreciation to our member CSDs in Latin America, the Caribbean and Bermuda for their commitment and hard work during the first four months of the project.”

“All 15 ACSDA member central securities depositories (CSDs) and securities settlement systems (SSSs) benefiting directly from this strategic initiative have established their internal work teams and are on track to assess their respective organizations on the 21 principles specifically applicable to CSDs and SSSs,” adds Bruce Butterill, ACSDA Executive Director.  Known as the Principles for Financial Market Infrastructures (PFMIs), these involve completion of a self-assessment of the CSDs’ legal basis and governance, risk management, operations and participant access policies.

"“Of the 15 participating market infrastructures, 13 are in IADB member countries, with 2 additional CSDs being directly sponsored by ACSDA.  And our members’ participation does not stop there,” Butterill added, “We’re also grateful to the 6 member CSDs who have also committed to contributing from their own experience and expertise in approaching the demands of the PFMIs. In addition, we are very pleased with the growing relationships between ACSDA and our members and national regulators, including 8 from supervisory agencies invited by their CSDs to participate in the project, and who traveled to Panama in May to participate in our 3-day PFMI training workshop.

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What is driving the ACSDA-IADB concerted effort?  Over the past five years, regulators worldwide have endorsed, advocated and, in most markets, mandated the adoption of the PFMI standards for market infrastructures including CSDs, SSSs, central counterparties, payment systems and trade repositories.  By working toward these standards, market infrastructure organizations demonstrate their capabilities and proficiencies and assure their participants, issuers, regulators, domestic and international investors and the public that their settlement and custody services are reliable, legally enforceable and risk-managed.

The PFMI self-assessments are also noteworthy as the International Monetary Fund and World Bank’s basis for evaluating the financial market infrastructures in their Financial Sector Assessment Program, which assesses key aspects of market economies.

ACSDA’s proposal to elevate PFMI compliance across the region was developed and submitted to the IADB by past ACSDA President Jorge Hernán Jaramillo, CEO of DECEVAL, Colombia, and the ACSDA Secretariat on behalf of the Executive Committee last year.  It aims for each CSD, in sequential stages, to complete its self-assessment with regulatory coordination, enhance public disclosure and develop prioritized remediation plans, thereby raising the Americas regional adherence to the PFMIs.

ACSDA’s proposal, one of nearly 120 projects considered by the IADB for funding last year, was one of a small group chosen for investment and support as one of the IADB’s prestigious Regional Public Group (RPG) initiatives. 

“As soon as we were notified of our selection, our Executive Committee set its plans in motion, having already chartered a PFMI Steering Group chaired initially by Isabel Pantoja, CEO of EDV, Bolivia,” notes Butterill. The governance of the project was well defined, and the Steering Committee meets regularly to review the project’s progress.

At the same time, the IADB addressed the project need for experienced advisors to support the benefitting CSDs’ efforts and to provide dedicated project management, and coordination with contributing CSDs and regional regulators. Earlier this year, it engaged Grupo de Consultores Interamericanos (GCI), a five-person consulting firm of market infrastructure and regulatory practitioners well known to ACSDA:  Mary Ann Callahan, Cecilia Humphrey, Vicente Lazen, Monique Moura and Loretta Stack.

The first major milestone was achieved with the GCI consultants developing and leading a three-day intensive PFMI training workshop in Panama in May, with GCI presenting, in both English and Spanish, their detailed reviews of the PFMIs, case studies, and regulatory aspects and responsibilities also addressed in the PFMIs, for 55 representatives from both the benefiting and contributing CSDs and participating supervisors. Adding to GCI’s presentations were speakers from ACSDA, IADB, IOSCO and ACSDA’s contributing CSDs.

Now that each team has begun work on its self-assessment, GCI schedules weekly video and/or telephone conference calls for planning, discussion and draft review. 

s a byproduct of their self-assessments currently underway, the CSDs are deepening their dialogue with their national regulators, resulting in closer coordination, and providing public disclosures for their constituents and prospective market investors. The CSDs’ responses will also be used to populate the World Forum of CSDs’ Single Disclosure Framework, a portal that collects the same PFMI data, along with data for the Association of Global Custodians’ Depository Information Gathering Project.

he next project phase will bring GCI to each of the CSDs for on-site reviews, accompanied by some contributing CSDs. The first such meetings are expected this October and November and others taking place next year in order to finalize the draft self-assessments and public disclosure reports, and prioritize risk remediation plans. 

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The bottom line … the PFMIs focus is on ensuring that all financial market infrastructures, including ACSDA’s depositories and securities settlement systems, accurately demonstrate their risk awareness and management and operational reliability.  Developed by central bank supervisors from the Bank for International Settlements’ Committee on Payments and Market Infrastructures (CPMI) and securities regulators from the International Organization of Securities Commissions (IOSCO), the PFMIs were issued in April 2012 after extensive industry and regulatory consultation.  In December 2012, CPMI-IOSCO supplemented the PFMIs with self-assessment templates and a defined disclosure framework.

Both documents are available in English and Spanish: 

Principles for Financial Market Infrastructures CPSS-IOSCO - April 2012 http://www.bis.org/cpmi/publ/d101a.pdf

Disclosure Framework and Assessment Methodology CPSS-IOSCO - December 2012 http://www.bis.org/cpmi/publ/d106.pdf

Since issuing these documents, CPMI and IOSCO have been proactive in urging adoption and have produced a range of subsequent reports tracking and auditing the PFMIs’ implementation across the G-20 markets.  As noted, the IMF and World Bank have also endorsed the PFMIs and are basing their FSAP market infrastructure reviews on the PFMIs. 

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