The Committee on Payments and Market Infrastructures (CPMI) and International Organization of Securities Commissions (IOSCO) are seeking input on discussion paper focusing on central counterparty (CCP) practices to address non-default losses (NDLs), such as losses from cyber attacks.
CCPs have become increasingly important in the financial system for managing counterparty risk, especially since the introduction of the clearing obligation for standardised OTC derivatives following the 2007–09 global financial crisis. Therefore, the resilience of CCPs in case of losses and liquidity shortfalls – whether they arise from the default of CCP clearing members or from non-default events (eg losses from cyber attacks) – has become critical for financial stability.
Non-default events can threaten a CCP’s viability as a going concern and its ability to continue providing critical services. Therefore, according to the Principles for financial market infrastructures (PFMI), CCPs must take action and have policies, procedures and plans for addressing NDLs, in addition to a sound risk management framework to mitigate and manage those risks.