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.
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