Cross-border securities settlement and risk analysis framework for ...

More documents

Recommendations

Info

4. Does the intermediary (1) / issuer (I)CSD provide credit extensions or advances of funds, and how are credit and liquidityrisks mitigated within the intermediary / issuer (I)CSD ?5. Does the intermediary (2) / issuer (I)CSD act as a principal in the settlement process ? Is the intermediary / issuer (I)CSDengaged in other types of risk generating activities ?6. What is the applicable liability regime of the intermediary / issuer (I)CSD to participants ? (incl. the standard of liability,the force majeure standard and any limitation to the liability regime, if any) ?7. Does the intermediary / issuer (I)CSD have an insurance policy in place to cover its liabilities ?7.1 What are the types of risks covered by the insurance contract ?7.2 What is the amount insured ?8. Does the investor (I)CSD run any credit or liquidity risk by settling transactions through the link, and how are theserisks managed ?Topic 2 :Default procedures (3)Questions1. How and on what authority would a decision to unwind securities or funds transfers be made in the issuer (I)CSD ?2. In the case of an unwind, would this affect all provisional securities and funds transfers or only a subset thereof ? Forthe latter, which procedures are in place to determine which transfers are unwound and in what order ?3. Is a guarantee fund in place to prevent contagion affects of a participant’s default ? What is the amount of theguarantee fund ?4. Is a loss-sharing arrangement in securities or in cash applicable in the intermediary / issuer (I)CSD in the case of a nonrecoveryof losses incurred ?5. Have either a decision to unwind securities or funds transfers, the guarantee fund or the loss-sharing arrangementever been applied in the past ? If so, what was the cause and the impact of this event ?Control environmentTopic 1 :Control, regulation and oversightQuestions1. Is the intermediary / issuer (I)CSD subject to licensing, supervision, oversight ?1.1 What institutions are responsible for licensing, supervision, oversight ?1.2 Has the institution responsible for licensing, supervision, oversight disclosed assessment results ?2. Is the intermediary / issuer (I)CSD subject to internal audit ?3. Is the intermediary / issuer (I)CSD subject to external audit ?3.1 What is the name of the external auditor ?4. Does the intermediary / issuer (I)CSD have an anti-money laundering policy in place ?5. Is the investor (I)CSD aware of a history of any losses at the intermediary / issuer (I)CSD ? If so, how have such lossesbeen covered ?(1) In the case of relayed links where the intermediary is another (I)CSD.(2) In the case of relayed links where the intermediary is another (I)CSD.(3) Procedures in place with the intermediary / issuer (I)CSD in the case of a participant default.138
CROSS-BORDER SECURITIES SETTLEMENT ANDRISK ANALYSIS FRAMEWORK FOR CROSS-BORDER LINKSOperational riskTopic 1 :Communication interfaceQuestion1. Does the intermediary / issuer (I)CSD have a proprietary system in place and / or are SWIFT messages used ? If SWIFTmessages are used, are they ISO15022 compliant ?Topic 2 :OutsourcingQuestion1. Does the intermediary / issuer (I)CSD make use of an external service provider in core functions ? If so, what are thesecore functions ?Topic 3 :Business continuityQuestions1. Does the intermediary / issuer (I)CSD have a formal business continuity plan in place ?1.1 What are the major elements of the business continuity plan ?1.2 What is the expected recovery time ?1.3 Does it include participation by members / clients ?1.4 Is this plan available for review by members / clients ?2. Does the intermediary / issuer (I)CSD have a back-up site ?2.1 What is the distance of the back-up site from the main site ?2.2 Is it a cold / warm / hot back-up site (1) ?2.3 How are data back-ups handled ?3. Has the effectiveness of business continuity plans been tested ?3.1 What is the testing frequency ?3.2 When were contingency plans last tested and what were the results ?4. Does the investor (I)CSD have back-up cash correspondents for the settlement currency of the link ?(1) A hot / cold back-up site is a location that an institution can move to after a disaster if the current facility is unusable. The difference between the two is that a hot site is fullyequipped to resume operations while a cold site does not have that capability. There is also what is referred to as a warm back-up site which has the capability to resumesome, but not all operations.139
Page 4 and 5: Box 2 - Settlement of cash obligati
Page 6 and 7: CHART 2INTERNALISATION AT THE INVES
Page 8 and 9: Box 4 - CPSS-IOSCO Recommendation a
Page 10 and 11: extend to the financial strength of
Page 12 and 13: the investor (I)CSD with its interm
Page 14 and 15: Topic 4 :The adequacy of local asse
Page 18: BibliographyBank for International

Cross-border securities settlement and risk analysis framework for ...

You also want an ePaper? Increase the reach of your titles

Delete template?

Save as template?