The European Association of CCP Clearing Houses (EACH) has today provided feedback on the FSB-CPMI-IOSCO Report “Central Counterparty Financial Resources for Recovery and Resolution”.
The key messages expressed by EACH its feedback are the following:
- CCPs already have in place a comprehensive number of measures to prevent and mitigate non-default losses arising from the various types of risk scenarios, e.g. investment and custody risks, general business or operational risks and uncovered liquidity shortfalls.
- Researchers have calculated that the probability of a non-default event causing a loss capable of exhausting both the regulatory capital held by the CCP and the annual profits held by the CCP, and therefore triggering resolution actions, is extremely low.
- The results of scenario 2 on cyber theft (i.e. that only through the use of resolution tools sufficient resources would have been mobilized to address the losses caused by a cyber theft) should be read with caution, as they could have been different would sampled CCPs have interpreted the given scenario differently and would have applied operational arrangements or cyber security measures with are also part of CCP risk management practices.
- Certain business and operational failures, such as a cyberattack, are not likely to be addressed with additional resources, but they should rather be prevented through the application of ex-ante measures, such as an appropriate cybersecurity policy.
For more information, please click here to download the EACH paper or visit othe EACH website at www.eachccp.eu
