Clearing houses play a systemically important and central role in Financial Market Infrastructure. As they come under increasing scrutiny from members, clients, and regulators, it is important that central counterparties (CCPs) continuously review and assess their risk practices, not only in line with regulatory requirements, but also with the continuously evolving market landscape.
This briefing document provides an overview of how LCH Group (LCH) approaches risk management, and the steps we have taken to ensure LCH leads the way towards a more resilient, reliable, and efficient marketplace for all participants.
In the paper, we highlight the four key lenses through which the LCH CCPs view and manage risk:
I. membership criteria
II. financial resources
III. the default management process
IV. the selection of products, which can and should be cleared
Along with an appropriate governance structure, they provide a framework for how CCPs can best manage the risks inherent in a vibrant, growing marketplace.
Download the paper here.