ISDA.com Washington, DC – As main counterparties (CCPs) continue to play a progressively important function in the global financial system, The Cleaning House and the International Swaps and Derivatives Association (ISDA) released a white paper recognizing crucial issues that regulators should think about as they develop a thorough resolution structure for systemically important CCPs.
As a result of worldwide mandates that require standardized derivatives to be centrally cleared, it is approximated that more than 70% of swaps are presently cleared, which has actually caused substantially increased concentrations of risk within CCPs.
Previously this year, the Financial Stability Board (FSB) revealed that it will issue for public examination standards or guidance for CCP resolution planning, resolution methods and resolution tools. This white paper is meant to inform that effort.
“Having actually dedicated substantial thought and resources to ensuring the resolvability of the world’s biggest banks, it is now time to take the lessons learned in that process and make sure that CCPs – where much risk has been concentrated by the post-crisis regulative regime – are similarly resolvable,” stated Greg Baer, President of The Cleaning House Association.
“The primary focus of regulators and market individuals must be on CCP durability and establishing robust CCP healing frameworks. Nevertheless, we can’t ignore the problem of CCP resolution and the effect the collapse of a CCP would have on financial stability. It’s for that reason essential this problem is considered in depth,” states Scott O’Malia, ISDA’s Chief Executive.
The paper, Considerations for CCP Resolution, identifies possibly considerable resolution tools or approaches for additional discussion and assessment by the official sector and market. The paper attempts to both emphasize and supported the thoughtful guidance that has actually been codified in the FSB’s Secret Elements of Effective Resolution Regimes for Financial Institutions and to document and recognize, from the perspective of clearing members and other cleaning participants, vital, related considerations that must be resolved in developing a practical and thorough resolution structure for systemically vital CCPs.
About The Cleaning House.
The Clearing Home is a banking association and payments business that is owned by the largest commercial banks and dates back to 1853. The Cleaning Home Payments Business LLC. owns and operates core payments system facilities in the United States and is currently working to update that facilities by developing a brand-new, common, real-time payment system. The Payments Company is the only private-sector ACH and wire operator in the United States, clearing and settling nearly $2 trillion in US dollar payments every day, representing half of all commercial ACH and wire volume.
Its affiliate, The Clearing House Association LLC., is a nonpartisan organization that participates in research, analysis, advocacy and lawsuits focused on financial policy that supports a safe, sound and competitive banking system.
Because 1985, ISDA has worked to make the worldwide derivatives markets safer and more effective. Today, ISDA has over 850 member institutions from 67 nations. These members make up a broad variety of derivatives market participants, including corporations, financial investment managers, government and supranational entities, insurance coverage companies, energy and commodities firms, and international and local banks. In addition to market participants, members also consist of essential elements of the derivatives market facilities, such as exchanges, intermediaries, clearing homes and repositories, in addition to law firmslaw practice, accounting companies and other service providerscompany.
Information about ISDA and its activities is readily available on the Association’s site: www.isda.org.