The Committee on Payments and Market Infrastructures (CPMI) and the International Organization of Securities Commissions (IOSCO) published a report, entitled Implementation monitoring of PFMI: follow-up Level 3 assessment of CCPs’ recovery planning, coverage of financial resources and liquidity stress testing, assessing the progress made by central counterparties (CCPs) in addressing the most serious issues of concern that were identified in a previous report published in 2016.
Overall, while the report found that participating CCPs have made progress in implementing arrangements consistent with the key international standards on financial risk management and recovery practices (the Principles for financial market infrastructures or PFMI), some CCPs are still failing to implement a number of measures in the areas of risk management and recovery planning. The failure of these CCPs to implement practices constitutes, in certain instances, serious issues of concern and warrants immediate attention. The CPMI and IOSCO encourage the relevant CCPs to take action as a matter of priority.
While 10 derivatives CCPs were surveyed in the initial assessment in 2016, the follow-up assessment report has expanded the sample to 19 globally active and regionally focused CCPs spanning 17 jurisdictions and providing clearing services to a broader range of product classes, such as repo, bonds and equities, in addition to derivatives.
The CPMI and IOSCO reiterate the importance of developing comprehensive and effective recovery plans, consistent with standards in the PFMI and informed by associated guidance in the revised Recovery Report. To that end, if a CCP has not fully implemented a comprehensive and effective recovery plan, it is a serious issue of concern that should be addressed with the highest priority. The CPMI and IOSCO also reiterate that, according to the PFMI, an FMI should maintain sufficient liquid resources in a wide range of potential stress scenarios. The fact that, following the publication of the initial Level 3 report, some CCPs continue to lack sufficient liquidity-specific scenarios is a serious issue of concern that the relevant CCPs should address with the highest priority. The CPMI and IOSCO will continue monitoring the implementation of the PFMI.