Featured Product

    Benoît Cœuré of ECB Speaks on a Cooperative Approach to CCP Resolution

    April 23, 2018

    Benoît Cœuré of ECB spoke at the ILF Conference on “Resolution in Europe: the unresolved questions” in Frankfurt. He emphasized the importance of FSB guidance on central counterparty (CCP) resolution and its focus on a cooperative approach to the recovery and resolution of CCPs. He added that cooperation in resolution planning, and co-ordination between recovery and resolution planning, is essential to ensure that a CCP is able to continue performing its systemically relevant functions across all concerned jurisdictions.

    However, the resolution authority should have flexibility to determine the optimal choice of available tools, as well as the best point in time for entry into resolution, as long as the “no creditor worse off” principle is respected. He also stressed that it is beneficial to assess how further guidance could support authorities in assessing potential resolution funding needs for individual CCPs, taking into account, for example, the specific risk characteristics of the products they clear, the types of market they serve, and the concentration in CCP memberships. He said that he fully supports the work under way in FSB in this area, before moving on to discuss the three key areas where more work is needed:

    • Enhanced international cooperation. Authorities responsible for several major cross-border CCPs have not yet started working on resolution planning and no cross-border crisis management arrangements are yet in place. This could be because of barriers to sharing confidential information or reticence to engage with others while legislative frameworks are still evolving. In this context, discussions should get under way as soon as possible, although CPMI and IOSCO are conducting some work in this respect.
    • Improved understanding of CCP resolution. He discussed the FSB work in this area and highlighted that further steps should be taken to improve the analytical foundation of CCP resolution planning and to better prepare authorities. Referring to the CPMI and IOSCO recently published guidance for supervisory stress testing, he added that testing the recovery plan of a CCP by authorities may help in this regard. Furthermore, coordinating CCP and banking stress testing will provide additional understanding on how resolution plans would work in case of extreme scenarios. With stress testing, potential funding strains can be further explored and useful information for CCP and bank supervisors as well as resolution authorities can be gleaned.
    • Better coordination of resolution and recovery arrangements in the Single Market. Under the legislative proposal for a regulation on CCP recovery and resolution, authorities will be required to enforce CCPs’ contractual obligations before using any resolution tools, subject to limited exemptions. Another aspect to keep in mind is that systemic risk for the Single Market may arise not only from EU CCPs, but also from non-EU CCPs with substantial activities in the EU. This aspect will become increasingly important after Brexit. Thus, the current efforts to strengthen the EU arrangements for third-country CCPs are very important. Particularly, if a third-country CCP is systemically important for EU, it is not enough to focus on regulatory equivalence alone.

    He concluded that CCPs are systemically important across border and across the EU. Therefore, any recovery and resolution planning for individual CCPs requires an EU-wide systemic risk assessment and a strong coordination at the global level. However, at the EU level, this could involve, for instance, aggregated data collection, joint stress-testing, and crisis simulation exercises, along with the closer coordination of related supervisory assessments and recovery and resolution planning. Given the financial stability, macro-prudential, and liquidity issues a CCP resolution raises, central banks must be involved in all aspects of this work.

     

    Related Link: Speech

    Keywords: Europe, EU, PMI, Banking, Securities, CCPs, Recovery and Resolution, Brexit, ECB

    Related Articles
    News

    RBNZ Publishes Financial Stability Report for May 2020

    RBNZ published the financial stability report for May 2020. This review of the financial system in the country highlights that the economic disruption associated with COVID-19 will present challenges to the financial system.

    May 27, 2020 WebPage Regulatory News
    News

    Regulators and Private Sector Meet to Discuss COVID Policy Responses

    Financial policymakers and international standard-setters met virtually with private-sector executives to discuss international policy responses to COVID-19 pandemic.

    May 26, 2020 WebPage Regulatory News
    News

    HKMA Consults on Supervisory Policy for OTC Derivatives Transactions

    HKMA is consulting on revisions to the Supervisory Policy Manual module CR-G-14 on margin and other risk mitigation standards for non-centrally cleared over-the-counter (OTC) derivatives transactions.

    May 25, 2020 WebPage Regulatory News
    News

    EBA Examines Impact of COVID Crisis on Banking Sector in EU

    EBA published thematic note presenting a preliminary assessment of the impact of COVID-19 outbreak on the banking sector in EU.

    May 25, 2020 WebPage Regulatory News
    News

    HKMA Clarifies Regulatory Treatment of Measures to Ease COVID Impact

    HKMA published a circular, addressed to authorized institutions, on the application of the Basel Committee guidance on certain COVID-related measures.

    May 25, 2020 WebPage Regulatory News
    News

    PRA on Regulatory Capital and IFRS 9 Requirements for Payment Holidays

    PRA provided further information on the application of regulatory capital and IFRS 9 requirements to payment holidays granted or extended to address the challenges arising from COVID-19 outbreak.

    May 22, 2020 WebPage Regulatory News
    News

    PRA Finalizes Policy on Supervisory Approach for Insurance SPVs

    PRA published final policy (in PS13/20) setting out the approach and expectations for authorization and supervision of insurance special purpose vehicles (ISPVs or insurance SPVs).

    May 22, 2020 WebPage Regulatory News
    News

    BoE Publishes Version 2.0.1 of Capital+ XBRL Utility

    BoE published version 2.0.1 of the Capital+ XBRL Utility, along with the related release notes.

    May 21, 2020 WebPage Regulatory News
    News

    HKMA on Fintech Adoption and Innovation by Banks in Hong Kong

    HKMA announced the publication of a report on fintech adoption and innovation in the banking industry in Hong Kong.

    May 20, 2020 WebPage Regulatory News
    News

    BIS on Impact of Increasing Use of Cloud Technology on Cyber Risk

    BIS published a working paper that examines the drivers of cyber risk, especially in context of the cloud services.

    May 20, 2020 WebPage Regulatory News
    RESULTS 1 - 10 OF 5214