Reports
Policy Objectives for the Over-the-Counter (OTC) Market
Statement
of the President's Working Group on Financial Markets, November 2008.
This statement established policy objectives for the OTC derivatives
market, with a primary focus on credit default swaps, in order to:
improve market transparency and integrity for Credit Default Swaps;
enhance risk management of OTC derivatives; strengthen OTC derivatives
market infrastructure; and continue cooperation among regulatory
authorities.
Progress Summary on OTC Derivatives Operational Improvements
Summary
of the President's Working Group on Financial Markets, November 2008.
In 2005, regulators embarked on a collective effort to improve
participants’ management of their OTC derivatives operations, since the
existing infrastructure was not sufficiently scalable to support the
rapid growth of the market. To address these issues, major credit
derivatives dealers focused on improvements in automation and on
developing and standardizing legal documentation in order to make more
products eligible for electronic processing. This summary lists the
accomplishments from 2005-2008.
Memorandum of Understanding
Memorandum
of Understanding between the Federal Reserve Board, Securities and
Exchange Commission, and Commodity Futures Trading Commission regarding
central counterparties for credit default swaps, November 2008. This MOU
reflected the parties’ intent to cooperate, coordinate, and share
information in carrying out their respective responsibilities and
exercising their respective authorities with regard to Central
Counterparties (CCPs) for credit default swaps.
Progress Update on March Policy Statement on Financial Market Developments
Update
of the President's Working Group on Financial Markets, October 2008.
This update to the PWG’s March 2008 policy statement found that market
participants and supervisory authorities had taken substantial steps
toward implementing the PWG’s recommendations, that much progress had
been made, and that these efforts were works-in-progress. It concluded
that implementation of the PWG’s recommendations needed to continue in
order to address weaknesses in global financial markets, institutions,
and regulatory policies, consistent with the broader goals of mitigating
systemic risk, helping to restore investor confidence, and facilitating
economic growth.
Policy Statement on Financial Market Developments
Statement
of the President's Working Group on Financial Markets, March 2008. This
statement reviewed the causes of the market turmoil: a breakdown in
underwriting standards for subprime mortgages; a significant erosion of
market discipline; flaws in credit rating agencies’ assessments; risk
management weaknesses; and regulatory policies that failed to mitigate
risk management weaknesses. This statement also made recommendations to:
reform the mortgage origination process; enhance disclosure and improve
practices; reform the credit rating agencies’ processes; ensure that
global financial institutions take appropriate steps to address the
weaknesses in risk management; and ensure that prudential regulatory
policies provide strong incentives for effective risk management
practices.
Agreement Among PWG and U.S. Agency Principals on Principles and Guidelines Regarding Private Pools of Capital
Agreement
among the PWG and agency principals, February 2007. The President's
Working Group on Financial Markets set forth fundamental principles and
guidelines regarding investor protection and systemic risk with respect
to private pools of capital. In response to the PWG’s Principles and
Guidelines Regarding Private Pools of Capital (February 2007), two
private-sector groups released:
Enhancing Disclosure in the Mortgage-Backed Securities Markets
Report of the Staff Task Force (Department of the Treasury, Office of
Federal Housing Enterprise Oversight, and Securities and Exchange
Commission), January 2003. The purpose of the report was to evaluate
government
-sponsored enterprises' current disclosure practices in
mortgage-backed securities and to consider whether disclosure
enhancements would be desirable in assisting investors to make informed
investment decisions. The report found that additional disclosures in
the MBS markets were desirable, feasible and would be useful for
investors. To implement additional disclosures, the report encouraged
market participants to reach a consensus on appropriate enhancements.
Joint Report on Retail Swaps
Report of the President's Working Group on Financial Markets, December
2001. The report addressed the potential uses of swaps by retail
customers, whether financial institutions were willing to offer such
agreements, and appropriate regulatory structure to address customer
protection issues. The report concluded that it was not necessary to
recommend legislative action for retail swaps offered to persons other
than eligible contract participants.
Hedge Funds, Leverage, and the Lessons of Long-Term Capital Management
Report of the President's Working Group on Financial Markets, April
1999. The report recommended measures to improve transparency, enhance
private-sector risk management, develop risk-sensitive capital adequacy,
support financial contract netting in bankruptcy, and encourage
compliance with international standards for offshore financial centers.
Over-the-Counter Derivatives Markets and the Commodity Exchange Act
Report of the President's Working Group on Financial Markets, November
1999. The report recommended changes to the Commodity Exchange Act to
provide legal certainty for over-the-counter derivatives, remove
impediments to innovation, reduce systemic risk, and protect customers
from unfair practices.