Banks must report a minimum set of data on their derivatives trades from the end of next year to help regulators monitor financial stability and spot abuses, a draft plan from market supervisors and central bankers said on Wednesday.
Regulators want a full picture of the $600 trillion off-exchange derivatives market at all times by requiring banks to provide transaction details to repositories.
Supervisors were alarmed during the financial crisis when they were not able to quickly see who was exposed to U.S. bank Lehman Brothers when it collapsed in September 2008, which hampered their policy response.
The Group of 20 leading economies (G20) called in 2009 for derivatives to be centrally cleared and transactions reported to repositories by the end of 2012.
Several repositories have already been set up for different types of derivatives, such as the Trade Information Warehouse for credit default swaps and the Equity Derivatives Reporting Repository, both run by U.S. DTCC.
The Committee on Payment and Settlement Systems (CPSS) of central bankers and the International Organization of Securities Commissions (IOSCO) want lenders to report trades according to global minimum requirements from the end of 2012.
Current formats are based on voluntary agreements with banks and regulators want a consistent set of information.
The proposed requirements and data formats will apply to both market participants reporting to trade repositories and to trade repositories reporting to the public and to regulators, the CPSS-IOSCO report said.
The report also finds that certain information currently not supported by TRs would be helpful in assessing systemic risk and financial stability, it added.
The extra details regulators want include:
-- current exposure, netting and collateralization details on bilateral portfolios of off-exchange transactions;
-- current market values of individual open OTC derivatives transactions;
-- information on collateral assets that are applied to OTC derivatives portfolios, including the valuation and disposition of these assets.
Frederic Hervo, a CPSS member from the Banque de France, said that so far there is no deadline for reporting this value added information above the planned minimum requirements.
CPSS-IOSCO also wants a global system for tagging each trade to identify the counterparties from the end of 2012.
What would be consistent is to have an international legal entity identifiers in place when the minimum reporting requirements are enforcable, Hervo said.
Regulators also want progress on a global system for classifying OTC derivatives contracts by the end of next year, Hervo added.
Banks face higher data collection costs and Hervo said they have an opportunity in the public consultation to air their views on costs and benefits of what's being proposed.
(Reporting by Huw Jones; Editing by Mike Nesbit)