Transcript of Question & Answer Session The Transition to Central Clearing of OTC Derivatives in Australia

At the top of the speech you mentioned data. As an economist you've spent your time looking at data, are you satisfied with the data quality and the information being reported and our regulators effectively being able to effectively use the data?

I think a lot has been done to upgrade data availability. It's actually been a consistent theme when we've had crises around the world that one of the first responses to that is a call for better data so that we'll have better early warning indicators and better opportunity to take appropriate action to manage risk. So a lot's been done on that front in the wake of the global crisis. One of the initiatives that was mentioned this morning has been the trade reporting requirements, but increased transparency is being required on a whole range of fronts. My general sense is there's always more you can do in this area, but regulators and analysts do have a lot of data available now and I think the challenge is to make best use of that, to keep on working to improve our analysis to make sure that we manage risk as effectively as we can.

If I could just expand on that, how important is it for global regulators to share the data? I mean the data available to you in Australia is a certain amount of data relative to what the US and Europeans have, yet you have all these systemically interconnected facilities and market participants. How important is it for you as regulators to share that data and move forward with that?

Well we view that as important. So for example with the trade repository data we've entered into co-operative arrangements with other regulators to ensure appropriate sharing of data on that front. Similarly with supervision of CCPs, once you have co-operative arrangements for mutual recognition you also need to have information sharing and in our case we've entered into arrangements with the CFTC and with the Bank of England to share information in those areas. I think those things are very important.

Good thank you. Now you mentioned that Plan B was recovery and resolution. A third ‘R’ has been added recently to the discussion and that's ‘resilience’. And that largely has to do with the ability of, you know, largely around transparency and reviewing of stress testing, risk management practices of a CCP. How importantly do you view that third ‘R’, that resilience, in terms of regulatory tools available?

Well it's very important. ‘Resilience’ is the first line of defence because you don't want to get into a situation of extreme stress where you have to activate recovery plans. That's your second line of defence and then the third line of defence is resolution if the first two lines fail. But we put a lot of effort into resilience and I know that other supervisors of these facilities are doing the same. The work on resilience actually has been our main work as a supervisor at the Reserve Bank because we haven't had resolution powers up to this point and so in our case, for us, it's important to supplement that with additional powers on that front, but I definitely think that resilience is your first line of defence.

Good well please thank Assistant Governor Malcolm Edey for his comments today, in joining us today, we're going to move to the next panel which will be ‘Resolution, Recovery and Resilience’, so thank you very much.

Thank you very much.