After the market turmoil caused by the COVID-19 pandemic in March and April 2020, the ISDA Clearing Member Committee analyzed how central counterparty (CCP) risk management frameworks reacted to the crisis, based on feedback from CCPs.

The results show CCPs dealt with the crisis well, managing record volumes while most of their staff worked from home. In total, there were three member defaults or close-outs, none of which threatened financial stability. This reflects a more stable financial system overall: clearing members are much better capitalized and hold more liquidity compared to the last crisis.

However, some issues did emerge. Procyclical initial margin requirements exacerbated market stress at certain points. Clearing members also lacked timely information about backtesting breaches and procyclicality in margin models. The paper makes recommendations to address both of those points.