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Central counterparties (CCPs) are becoming an increasingly critical component of global financial market infrastructure as a result of post-global financial crisis reforms aimed at encouraging central clearing in over-the-counter (OTC) derivatives markets, according to a new report from collection of global policy-makers.

The group — which includes the Financial Stability Board, the Committee on Payments and Market Infrastructures, the International Organization of Securities Commissions  and the Basel Committee on Banking Supervision — states in the report that the push to encourage central clearing has, in turn, made CCPs increasingly important to the global financial system.

The report, which maps connections between CCPs, their clearing members and other financial services firms, finds a high level of concentration at a small number of CCPs; exposures to CCPs are concentrated among a small number of firms; and that a small number of entities tend to dominate the provision of each of the critical services required by CCPs.

“This relationship between CCPs and other entities suggests that a failure at one of these central elements of a CCP network would likely have significant consequences for the rest of the network,” the report says.

The analysis is intended to help regulators design supervisory stress tests and to inform their efforts to promote CCP resilience, recovery and resolvability.

“CCPs should be subject to strong regulatory, supervisory and oversight requirements to fully realize the financial stability benefits they offer,” the report states. “Analyzing the network of relationships is a useful starting point for understanding potential sources of systemic risk in central clearing.”