Unveiling the Complexities of Financial Market Infrastructures' Risk Management: A Comprehensive Guide for the PFMI
The Global Financial System's Lifeline: FMIs and Their Risks
Financial Market Infrastructures (FMIs) are the backbone of the global financial system, facilitating the smooth operation of payment systems, securities settlement, and more. But what happens when things go awry? How do FMIs manage general business risks and losses? This is the crucial question addressed in the recent consultative report by the Bank for International Settlements' Committee on Payments and Market Infrastructures (CPMI) and the International Organization of Securities Commissions (IOSCO).
A Deep Dive into General Business Risks and Losses
General business losses are a unique category of financial setbacks. Unlike participant defaults or credit and liquidity risks, they are not directly addressed by existing principles. These losses can arise from the very operations of an FMI as a business enterprise, or from risks associated with other PFMI principles, such as legal, custody, and operational risks. They can be one-time or recurring, adding an extra layer of complexity to FMI management.
The Consultative Report: A Guide for FMIs and Authorities
The report aims to provide supplemental guidance for FMIs and relevant authorities, elaborating on the principles already established in the Principles for Financial Market Infrastructures (PFMI). It takes into account findings from the CPMI-IOSCO Level 3 assessment report on general business risks and prior work on CCP practices to address non-default losses. The report covers crucial areas, including:
- Identifying, Monitoring, and Managing General Business Risks: A comprehensive approach to risk management.
- Determining the Minimum Amount of Liquid Net Assets Funded by Equity: Ensuring financial stability.
- Governance and Transparency: Building trust and accountability.
A Call for Feedback: Your Voice Matters
The report is open for public comment until February 6, 2026. Your feedback is invaluable, as it will help shape the future of FMI risk management. Please submit your comments via email to the CPMI Secretariat (cpmi@bis.org) and the IOSCO Secretariat (GBR-CP@iosco.org). Remember, commercial or sensitive information should be redacted for publication. Your insights could be the key to a more resilient global financial system.
The Big Question: Where Do You Stand?
Do you agree with the report's approach to general business risk management? Or do you have a different perspective? Share your thoughts in the comments below! This is your chance to contribute to the evolution of FMI governance and risk management. Let's spark a discussion and explore the complexities together.
