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    FSB Proposes Guidance on Financial Resources to Support CCP Resolution

    May 04, 2020

    FSB is consulting on guidance on financial resources to support central counterparty (CCP) resolution and on the treatment of CCP equity in resolution. FSB has set out guidance on assessing the adequacy of financial resources to absorb losses and to cover other costs in resolution. The comment period on the guidance, which is intended to assist CCP resolution authorities, ends on July 31, 2020.

    The draft guidance is based on the concepts included in a discussion paper on financial resources to support CCP resolution and the treatment of CCP equity in resolution, which the FSB published for public consultation in November 2018. The draft guidance takes into account the comments received in that earlier public consultation and feedback from the resolution authorities of CCPs. The guidance proposes five steps to guide the authorities in assessing the adequacy of the financial resources of a CCP and the potential financial stability implications of their use. The authorities should:

    • Identify hypothetical default and non-default loss scenarios (and a combination of them) that may lead to a resolution of a CCP
    • Conduct a qualitative and quantitative evaluation of existing resources and tools available in the resolution of the CCP
    • Assess potential resolution costs
    • Compare existing resources and tools to resolution costs and identify any gaps
    • Evaluate the availability, costs and benefits of potential means of addressing any identified gaps

    The guidance addresses the treatment of CCP equity in resolution. It provides a framework for resolution authorities to evaluate the exposure of CCP equity to losses in recovery, liquidation, and resolution and how (where it is possible) the treatment of CCP equity in resolution could be adjusted.

     

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    Comment Due Date: July 31, 2020

    Keywords: International, Banking, Securities, CCP, CCP Resolution, Resolution Planning, OTC Derivatives, FSB

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