ISDA, the Futures Industry Association (FIA) and the Institute of International Finance (IIF) appreciate the opportunity to comment on the consultation paper “Financial resources to support CCP resolution and the treatment of CCP equity in resolution” and believe that the consultation paper is another welcome step towards developing CCP resolution regimes.

In our response, we make the following points:

Part I: Assessing the adequacy of financial resources to support CCP resolution

• The Associations support the five-step approach and more quantitative clarity
• The five-step process should be further developed into a CCP capital requirements framework
• The need for increased transparency and testing of the resolution plans

Part II: Treatment of CCP equity in resolution

• We welcome the focus of the consultation paper on ways to expose CCP equity in resolution.
• Equity should be fully loss bearing in line with corporate finance principles
• The NCWO counterfactual should be clarified
• Participants should be compensated for the use of recovery and resolution tools
• Clear distinction between recovery and resolution
• Resolution tools should not make the crisis worse
• Resources to cover losses should be different from those set aside for recapitalization
• Incentives need to be aligned
• CCPs should have more SITG in two tranches

The Associations will continue to work with the FSB as they develop their recommendations.