ESRB, as part of its occasional paper series, published a paper examining the indicators for monitoring central counterparties (CCPs) in EU. The paper presents indicators included in the ESRB Risk Dashboard, along with the additional ESRB-developed indicators, to show a broader range of information on CCP functioning.
The paper provides a methodological background to the development of the individual measures and discusses aspects that should be considered when designing a monitoring framework for CCPs. The paper begins by providing an overview of the central clearing landscape in the EU. It then presents the data used in the development of CCP indicators, also discussing the rationale for the indicators and their drawbacks. Finally, the paper describes a number of data issues identified during the analytical process, including some potential solutions, before offering a conclusion. The conclusion highlights a number of areas in which more granular data are required to monitor the interconnectedness of CCPs within the broader financial system. The paper points to different possible interpretations in respect of the meaning of some public quantitative disclosure (PQD) data fields and raises issues in relation to the harmonization and validation of the dataset used.
The indicators are designed to provide a macro-prudential view of resources, liquidity, and collateral policies of CCPs; margin and haircut requirements; interoperability arrangements; and market structure and concentration at the CCP level. The indicators cover all CCPs that are authorized within the EU, although the values of individual measures across CCPs should be analyzed and interpreted with caution, keeping in mind the significant differences between individual CCPs’ business models, membership structures, and products cleared.
Related Link: Paper on CCP Indicators (PDF)
Sam leads the quantitative research team within the CreditEdge™ research group. In this role, he develops novel risk and forecasting solutions for financial institutions while providing thought leadership on related trends in global financial markets.
Previous ArticleRBNZ on Responses to Proposed Changes to Disclosure Rules for Banks
APRA has concluded its review of the comprehensive plans of authorized deposit-taking institutions for the assessment and management of loans with repayment deferrals.
ESAs (EBA, EIOPA, and ESMA) published the first joint report that assesses risks in the financial sector since the outbreak of the COVID-19 pandemic.
BoE and HM Treasury confirmed that the COVID Corporate Financing Facility (CCFF) will close for new purchases of commercial paper, with effect from March 23, 2021.
ECB published a decision allowing the euro area banks under its direct supervision to exclude certain central bank exposures from the leverage ratio.
ESAs launched a survey seeking feedback on the presentational aspects of product templates under the Sustainable Finance Disclosure Regulation (SFDR or Regulation 2019/2088).
ECB published input of the European System of Central Banks (ESCB) into the EBA feasibility report on reducing the reporting burden for banks in EU.
EC adopted a decision determining, for a limited period of time, that the regulatory framework applicable to central counterparties, or CCPs, in the UK and Northern Ireland is equivalent to the requirements laid down in the European Market Infrastructure Regulation (EMIR or Regulation 648/2012).
EBA has decided to phase out the guidelines on legislative and non-legislative moratoria of loan repayments, in accordance with the earlier specified end of September deadline.
EBA published an Opinion addressed to EC to raise awareness about the opportunity to clarify certain issues related to the definition of credit institution in the upcoming review of the Capital Requirements Directive and Regulation (CRD and CRR).
ECB finalized the guide on assessment methodology for the internal model method for calculating exposure to counterparty credit risk (CCR) and the advanced method for own funds requirements for credit valuation adjustment (A-CVA) risk.