Implementation Monitoring of the PFMI: Level 3 Assessment on General Business Risks
Bank for International Settlements — Committee on Payments and Market Infrastructures (CPMI) (BIS-CPMI)
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Hallucination findings published
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Rich-narrative analysis of how AI models fail on this regulation, written for
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Both Claude Opus 4.7 with web search and Claude Sonnet 4.6 with web search produced failures on CPMI-IOSCO's Implementation Monitoring of the PFMI: Level 3 Assessment on General Business Risks (Bank for International Settlements, November 2025) that share a common shape: the...
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Hallucination Shape
(5 Response Hallucination + 28 Citation Hallucination = 33 Hallucination findings)
Citation Hallucination Modes (28 failures)
Fabricated
0
Pretextual
1
Contradictory
27
Hallucination findings
5 finding cards across
2 AI Models —
covering 5 Response Hallucinations +
28 Citation Hallucinations
(33 hallucination failures total).
Each card pairs the AI's answer against the authenticated regulator-text excerpt that contradicts it, and flags every AI-cited source as Fabricated / Pretextual / Contradictory.
Under PFMI Principle 15 Key Consideration 3, what is the specific condition that governs whether equity held under international risk-based capital standards (e.g. Basel/CRD) can be counted towards an FMI's liquid net assets funded by equity requirement?
Claude Opus 4.7 (web search on) answered
can be counted toward LNAFE ONLY to the extent that the underlying assets are also liquid in the Principle 15 KC4 sense and are not already committed against a different PFMI Principle's resource requirement
Regulator text says
equity held under international risk-based capital standards can be included where relevant and appropriate to avoid duplicate capital requirements.
What is the minimum liquid net assets funded by equity (LNAFE) that PFMI Principle 15 Key Consideration 3 requires an FMI to hold, and how exactly is that minimum structured and calculated under the rule text?
Claude Opus 4.7 (web search on) answered
requires an FMI to hold liquid net assets funded by equity (LNAFE) equal to at least the GREATER of (i) the amount needed to cover potential general business losses derived from the FMI's own scenario analysis, and (ii) six months of current operating expenses
Regulator text says
At a minimum, an FMI should hold liquid net assets funded by equity equal to at least six months of current operating expenses.
A capital management team at a major CCP is preparing an annual LNAFE sufficiency review. Provide an internal policy note specifying what capital instruments qualify toward LNAFE under PFMI Principle 15 Key Consideration 3, what must be held separately, and whether equity already held in compliance with international risk-based capital standards such as Basel or CRD frameworks can be counted toward LNAFE or must be held on top.
Claude Sonnet 4.6 (web search on) answered
KC3 of PFMI Principle 15 does NOT include any carve-out or exception for equity held under international risk-based capital standards such as Basel CET1. KC3 is the segregation requirement, not the equity-type or asset-quality provision.
Regulator text says
However, equity held under international risk-based capital standards can be included where relevant and appropriate to avoid duplicate capital requirements.
A head of liquidity risk at a major derivatives CCP wants a briefing covering the PFMI Principle 15 requirements for liquid net assets funded by equity — the minimum level, how it is calculated, and what qualifies — together with what the November 2025 CPMI-IOSCO assessment found about FMI compliance with this standard, and what changes the FIA and ISDA proposed in their response to the associated CPMI-IOSCO consultation.
Claude Sonnet 4.6 (web search on) answered
The six-month operating expense floor is in KC2, which requires LNAFE to cover 'potential general business losses' and sets a minimum of six months of current operating expenses.
Regulator text says
KC3 (d228 Annex A): At a minimum, an FMI should hold liquid net assets funded by equity equal to at least six months of current operating expenses.
A trade repository is preparing an internal regulatory engagement summary. Draft a 1-page methodology note on the November 2025 CPMI-IOSCO Level 3 assessment on general business risk: when the assessment process began, when data was collected from FMIs, when the assessment formally concluded, how many FMIs responded, on what basis they participated, and how findings were validated with FMIs before publication.
Claude Sonnet 4.6 (web search on) answered
The Level 3 assessment of FMI implementation of PFMI Principle 15 (general business risk) was carried out during the period 2023 to 2024.
Regulator text says
It focuses on general business risk and was carried out during 2023-25 by the Implementation Monitoring Standing Group (IMSG)... there were further rounds of engagement and follow up questions with the participating FMIs between November 2023 and April 2025.
Affected audiences
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Practitioners
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