Response to FSB on CCP Resolution Resources

On November 20, ISDA, FIA and the Institute of International Finance submitted a joint response to the Financial Stability Board (FSB) on its consultation on financial resources and tools for central counterparty (CCP) resolution. In the response, the associations express concern that the proposed approach leaves too much flexibility to resolution authorities, and call for more transparency and predictability on what may happen in a resolution scenario, including the tools resolution authorities may use and the circumstances and order in which resolution authorities would be likely to deploy those tools.

The associations also highlight the importance of ensuring that a CCP’s own equity is calibrated in a way that fosters correct incentives for CCP risk management and suggest this should be considered across the recovery and resolution continuum, rather than looking at resolution resources in isolation. The response stresses that authorities should not overly rely on tools such as cash calls and variation margin gains haircutting, which could severely damage market confidence and would come with serious risks to financial stability. The response also includes a detailed discussion on the FSB’s analysis of the resolution tools considered in the consultation.

Documents (1) for Response to FSB on CCP Resolution Resources

Remove Bureaucracy from Cross-margin Approvals

Cross-margining programs play a critical role in financial markets. By ensuring margin requirements more closely reflect the actual risk of a portfolio of products, they reduce liquidity strain and improve market efficiency, both of which will become even more important...

Joint Response on CCP Resolution

On September 7, ISDA and FIA responded to a Bank of England (BOE) discussion paper on central counterparty (CCP) resolution. The associations support greater clarity on valuation capabilities prior to a crisis scenario and the boundary between recovery and resolution,...