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
PRA published a set of questions and answers (Q&A) covering common queries regarding residential and commercial property valuations, for the purpose of the Capital Requirements Regulation (CRR), during the period of disruption caused by COVID-19 pandemic.
EBA published guidelines on loan origination and monitoring, which bring together prudential standards and consumer protection obligations, along with the anti-money laundering and the Environmental, Social, and Governance (ESG) considerations.
EBA published a consultation paper on the draft amended regulatory technical standards on own funds and eligible liabilities.
EBA published a report on convergence of supervisory practices in 2019.
IOSCO proposed updates to its principles for regulated entities that outsource tasks to service providers.
MAS announced that the first phase of the Veritas initiative will commence with the development of fairness metrics in credit risk scoring and customer marketing.
BoE published the Statistical Notice 2020/4 to update the buy-to-let (BTL) Phase 2 and Phase 3 definitions for the Interest Rate Type data item.
FSI published a brief note that examines challenges facing the banking sector as a result of the payment deferral programs put in place to support borrowers affected by the COVID-19 pandemic.
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.
PRA published the policy statement PS14/20, which contains the supervisory statement SS1/20 and the feedback to responses to the consultation paper CP22/19 on expectations for investment by firms in accordance with the Prudent Person Principle, or PPP, as set out in the Investments Part of the PRA Rulebook.