Four clearing agencies have been given the blessing of securities regulators and the Bank of Canada to operate as central counterparties (CCPs), allowing banks to refine their required capital positions based on their exposures to these infrastructure firms.

The four agencies — the Canadian Derivatives Clearing Corp. (CDCC), the Canadian Depository for Securities Ltd. (CDS), ICE Clear Canada, Inc., and the Natural Gas Exchange Inc. — have qualified as CCPs, according to the central bank and several members of the Canadian Securities Administrators (CSA) (including the Ontario Securities Commission (OSC), Alberta Securities Commission (ASC), Autorité des Marchés financiers (AMF), British Columbia Securities Commission (BCSC), and Manitoba Securities Commission (MSC)).

The designation will allow banks to determine their exposure to qualified CCPs, which in turn, will allow them to adopt lower capital requirements for their credit exposures to these organizations.

The new Basel III capital rules distinguish between CCPs based on their regulatory status, the bank and the regulators explain in a joint notice. And, the Office of the Superintendent of Financial Institutions (OSFI) has adopted the Basel Committee’s CCP definition, allowing Canadian banks to hold less capital for these exposures; although, OSFI also reserves the right to require banks to hold additional capital against their exposures to these CCPs.

The Bank of Canada and provincial securities regulators, which have the authority to oversee or regulate CCPs in Canada, report that they have adopted risk management standards consistent with the Principles for Financial Market Infrastructures (PFMIs) established by the Committee on Payment and Settlement Systems (CPSS) and the International Organization of Securities Commissions (IOSCO).