General Information & Client Service
  • Americas: +1.212.553.1653
  • Asia: +852.3551.3077
  • China: +86.10.6319.6580
  • EMEA: +44.20.7772.5454
  • Japan: +81.3.5408.4100
Media Relations
  • New York: +1.212.553.0376
  • London: +44.20.7772.5456
  • Hong Kong: +852.3758.1350
  • Tokyo: +813.5408.4110
  • Sydney: +61.2.9270.8141
  • Mexico City: +001.888.779.5833
  • Buenos Aires: +0800.666.3506
  • São Paulo: +0800.891.2518
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

BCBS Publishes Results of Survey on Proportionality in Bank Regulation

BCBS published a report presenting the results of a survey conducted on proportionality practices in bank regulation and supervision.

March 19, 2019 WebPage Regulatory News
News

EBA Single Rulebook Q&A: Third Update for March 2019

EBA published answers to seven questions under the Single Rulebook question and answer (Q&A) updates for this week.

March 15, 2019 WebPage Regulatory News
News

US Agencies Adopt Interim Rule to Facilitate Transfers of Legacy Swaps

US Agencies (FCA, FDIC, FED, FHFA, and OCC) are adopting and inviting comments on an interim final rule.

March 15, 2019 WebPage Regulatory News
News

OCC Updates Recovery Planning Booklet of the Comptroller's Handbook

OCC updated the Recovery Planning booklet of the Comptroller’s Handbook.

March 15, 2019 WebPage Regulatory News
News

EBA Publishes Report on Convergence of Supervisory Practices Across EU

EBA published annual report on the convergence of supervisory practices in EU.

March 14, 2019 WebPage Regulatory News
News

CPMI-IOSCO Publish Update to Level 1 Assessment of PFMI Implementation

CPMI and IOSCO jointly updated the Level 1 Assessment Online Tracker on monitoring of the implementation of the Principles for financial market infrastructures (PFMI).

March 14, 2019 WebPage Regulatory News
News

Agustín Carstens of BIS Speaks About New Role of Central Banks

While speaking at the 20th anniversary conference of the Financial Stability Institute (FSI), Agustín Carstens, the General Manager of BIS, highlighted the need for regulatory actions in light of the continued evolution of financial technology.

March 14, 2019 WebPage Regulatory News
News

PRA Publishes Policy Statement on Group Supervision Under Solvency II

PRA published a policy statement (PS9/19) that provides feedback on responses to the consultation paper CP15/18 and the final supervisory statement SS9/15 (Appendix) on group supervision under Solvency II.

March 14, 2019 WebPage Regulatory News
News

ECB Announces Start Date for Euro Short-Term Rate

ECB announced that it will start publishing the euro short-term rate (€STR) as of October 02, 2019, reflecting the trading activity of October 01, 2019.

March 14, 2019 WebPage Regulatory News
News

PRA Proposes to Update the Pillar 2 Capital Framework for Banks

PRA is proposing (CP5/19) to update the Pillar 2 capital framework to reflect continued refinements and developments in setting the PRA buffer (Pillar 2B).

March 13, 2019 WebPage Regulatory News
RESULTS 1 - 10 OF 2754