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18 January 2012

FN: Clearing industry embraces stress tests


Europe's clearing houses have published what is thought to be the first set of guidelines for stress-testing the sector, in a bid to ensure that these increasingly critical pieces of market infrastructure are able to withstand large-scale shocks to the financial system.

The guidelines were drawn-up by the European Association of Central Counterparty Clearing Houses (EACH), at the request of the International Organisation of Securities Commissions' (IOSCO) Committee on Payment and Settlement Systems. Their publication comes amid growing industry pressure for clearing houses, which are central to the global post-crisis reform agenda, to draw up living wills to ensure an orderly default in the event a CCP gets into trouble.

The guidelines are expected to feed into new US and European regulation to ensure global convergence of clearing house risk management standards.

IOSCO is the body of global regulators tasked with providing guidance to the Financial Stability Board on how best to implement the the Group of 20 post-crisis reform agenda.

In a statement, EACH said yesterday: "A CCP’s stress-testing regime must fully recognise the unique status of CCPs as market infrastructure dedicated to risk management and subject to specific regulatory requirements".

Full article (FN subscription required)



© Financial News


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