From the Regulators

Global policymakers issue several sets of new guidance

By James Langton |

The Financial Stability Board (FSB), the International Organization of Securities Commissioners (IOSCO), the Basel Committee on Banking Supervision, and the Committee on Payments and Market Infrastructures (CPMI), on Wednesday jointly published three sets of guidance, along with two reports, on the resilience, recovery, and resolvability of central counterparties (CCPs).

"CCPs are an increasingly important part of the financial system, particularly following post-crisis reforms to mandate central clearing of standardised over-the-counter derivatives," the policymakers say in an FSB news release. "To fully realize the benefits of CCPs, it is vital that they are subject to strong regulatory, oversight and supervisory requirements."

The four organizations agreed a joint workplan to co-ordinate international policy on CCPs back in 2015. The guidance and reports published today represent the completion of that work.

IOSCO and the CPMI issued additional guidance Wednesday regarding financial risk management for CCPs, which focuses on governance, credit and liquidity stress testing, and CCPs' contributions of financial resources to losses. They also released updated guidance on recovery for financial market infrastructure organizations.

Additionally, the FSB has finalized its guidance on implementing resolution arrangements for CCPs that sets out: powers for resolution authorities to maintain the continuity of critical CCP functions; details on the use of loss allocation tools, and; steps that authorities should take to establish crisis management groups for CCPs.

The four organizations also published a study into the interdependencies between CCPs, clearing houses, and financial firms, which covers 26 CCPs from 15 jurisdictions. The study is intended to help regulators ongoing work on CCP resolution.

They also issued a progress report on the implementation of the regulators' priorities that are set out in the joint workplan, which also recommends further work on CCP interdependencies, and on the financial needs of CCPs in resolution.

By the end of 2018, the FSB will determine whether there is a need for additional guidance on financial resources for CCPs in resolution.