The periods of market turmoil over the last several years have demonstrated the benefits that central clearing brings for global financial stability. Progress in implementing the G20 regulatory reforms agreed after the 2008–09 financial crisis has promoted the use of central counterparties (CCPs), as well as enhanced CCP resilience, recovery planning and resolvability. However, the shift to central clearing has also further increased the systemic importance of CCPs. More recently, Covid-19 and the reaction of the financial system have raised new issues as well as accentuated existing issues, including those related to margin practices. The CCP issues are broad in scope and it is critical to look holistically at historic events as well as emerging risks.
- The Committee will further examine whether and, if so, to what extent margin calls were, for at least some market participants, unexpectedly large in centrally cleared and uncleared markets. This work will also examine margin practice transparency, predictability and volatility during the March 2020 market turmoil and liquidity management preparedness of market participants to meet margin calls. This is joint work with the Financial Stability Engagement Group (FSEG) of IOSCO and the Basel Committee on Banking Supervision (BCBS) and being conducted as part of the broader international work on non-bank financial intermediation, coordinated by the FSB.
- The Committee will, together with IOSCO, continue the work on CCP resilience and recovery. This includes: (i) identifying current and effective practices and potential gaps regarding CCP non-default losses; (ii) progressing on issues related to the improvement of default management auctions; and (iii) analysing the impact of client clearing concentration on CCP access and portability.
- The Committee will conduct further work, in cooperation with IOSCO and the FSB, to consider the need for, and develop as appropriate, international policy on the use, composition and amount of financial resources in recovery and resolution to further strengthen the resilience and resolvability of CCPs in default and non-default loss scenarios.