G-10 approve regular collection of derivatives market statistics

The Governors of the central banks of the Group of Ten (G10) countries have approved, for implementation from end-June 1998, a proposal by the Euro-currency Standing Committee for the regular collection of statistics on derivatives markets through reporting by leading market participants. The reporting framework is based on a July 1996 report entitled "Proposals for Improving Global Derivatives Statistics", which was prepared by a working group of the Euro-currency Standing Committee chaired by Mr. Shinichi Yoshikuni, an Adviser at the International Department of the Bank of Japan. The framework has been finalised after a period of consultation with market participants and supervisory authorities. The approved framework differs from the July 1996 proposals in ways which will lessen the burden on reporting institutions.

When the report was released in July, the Governors noted that the implications of the growth of derivatives markets for the functioning of financial markets have been the subject of considerable discussion in recent years. They agreed with the evolving public consensus that derivatives markets serve a valuable role in strengthening the financial system by facilitating the reallocation of risk to market participants most able and willing to bear it. At the same time, it had become clear that improved information on the size and structure of derivatives markets is needed to increase market transparency and thereby help central banks, other authorities and market participants to better monitor patterns of activity in the global financial system.

The approved framework envisages the regular compilation of internationally consistent market statistics on the notional amounts and gross market values outstanding of broad categories of foreign exchange, interest rate and equity-based over-the-counter derivative instruments across a range of underlying currencies, interest rates and equity markets. The statistics will also include derivatives-related credit exposures before and after netting arrangements. The global market statistics will be compiled by national central banks and published by the BIS, initially on a semi-annual basis. Now that the content and timing of the reporting have been agreed to, individual central banks and regulators will develop appropriate reporting procedures for reporters in their national markets.

The framework is closely linked to the "Framework for Supervisory Information about the Derivatives Activities of Banks and Securities Firms", released jointly by the G10 Basle Committee on Banking Supervision and the Technical Committee of the International Organisation of Securities Commissions in May 1995. Whereas the supervisors' framework is intended to be applied to all of the institutions for which they have regulatory responsibility, the approved regular derivatives reporting framework applies to a limited number of larger dealers. For this smaller population, the supervisors' framework has been extended in ways that are necessary for the data to be suitable for consistent aggregation and for the statistics to shed light on derivatives activity within market risk categories.

The design of the regular reporting framework draws on the results of the most recent triennial Central Bank Survey of Foreign Exchange and Derivatives Market Activity, conducted in April 1995. Although the design of future derivatives surveys has not yet been settled, it is intended that these surveys be closely coordinated with the regular reporting framework, so as to create benchmarks for the regular reporting data through the use of a broader survey population while reducing overlapping data requirements on regular reporters as far as possible.