June 28, 2017

CPMI and IOSCO proposed draft guidance for authorities on how to design and run supervisory stress tests for central counterparties (CCPs). This consultative report contains a framework for supervisory stress testing of CCPs, which the authorities can use to evaluate the collective response of a set of CCPs to one or more financial stresses. Comments should be submitted by September 22, 2017.

As a result of the Group of 20 countries, or G20, derivatives reforms and owing to the move toward central clearing of standardized OTC derivative contracts, the role of CCPs in the financial system has gained in importance. Conducting stress tests of this type could help authorities to better understand the impact of a common stress event affecting multiple CCPs on the broader economy. It would also help the authorities to understand the implications of interdependencies between markets, CCPs, and other entities, such as liquidity providers and custodians. “The framework is also flexible enough to allow authorities to design a stress test that is best suited to their circumstances," said IOSCO Board Chairman Ashley Alder. The framework covers six components of a stress-testing exercise:

Setting the purpose and exercise specifications

Establishing governance arrangements

Developing stress scenarios

Collecting and protecting data

Aggregating results and developing analytical metrics

Determining the use of results and disclosure

 

Related Links

Cover Note to Consultation (PDF)

Consultation Paper (PDF)

Comment Due Date: September 22, 2017

Keywords: International, CPMI, IOSCO, Securities, CCP, OTC Derivatives, Stress Testing

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