The Bank of Russia will discuss with the market disclosure of the complex derivatives

The Bank of Russia has proposed to enshrine in law the requirements for financial institutions to provide information when entering into transactions with complex derivatives. This is stated in the report for public consultation, “Providing information to legal entities when concluding complex derivative transactions.”

According to the report, information should be provided before entering into complex derivatives transactions with entities that are not qualified investors.

It is also proposed to discuss whether to enshrine a right of legal persons recognized as qualified investors, to require information about complex derivatives from financial institutions.

To complex derivatives, the report includes all settlement of OTC derivatives and some OTC commodity derivatives. The information should inform the investor must include information about the substance of the derivative, its risks and potential consequences of use in the form of scenarios.

In addition, the report discussed the criteria according to which a legal entity may be recognized as qualified investors. Thus, it is proposed to determine should be taken into account only financial indicators of legal entity or it is also necessary to assess the availability of staff with the necessary expertise and corporate procedures, evidence of ability to assess risks of complex derivatives. Another important issue: is the legal person required to make a decision on recognition as a qualified investor or biggest company can be attributed to qualified investors, without their solution, upon compliance with the law requirements to the financial position of the company.

The authors of the report believe that the introduction of the proposed regulation would eliminate the existing gaps in the legislation, adequately protect the interests of non-financial companies entering into derivative transactions, and to reduce legal uncertainty for financial institutions operating on a derivative market.

13 Feb 2020