Global policymakers warn that central counterparties (CCPs) in the derivatives market remain vulnerable to certain risks and regulatory gaps.

The International Organization of Securities Commissions (IOSCO) and the Committee on Payments and Market Infrastructures (CPMI) published a report on Tuesday that examines measures that have been adopted in order to enhance the resilience of CCPs, in the wake of the financial crisis.

The report, which looks at the financial risk management and recovery practices of 10 derivatives CCPs and the implementation of key standards for the industry, finds that although central counterparties “have made important and meaningful progress” in implementing global standards, “some gaps and shortcomings have nevertheless been identified, notably in the areas of recovery planning and credit and liquidity risk management.”

Additionally, policymakers issued further guidance designed to bolster supervision and oversight of CCPs, including how these infrastructure firms should implement key principles to further improve their resilience and recovery planning, such as enhancing governance and disclosure relating to the CCP’s risk management framework; and credit and liquidity stress testing.

“Although the risk of default cannot be entirely eliminated from the global financial system, we aim to limit potential systemic risks arising from any default by a central counterparty member as much as possible by applying a robust but balanced approach to reinforce financial buffers and risk control,” says Ashley Alder, IOSCO chairman, in a statement.

Also Tuesday, the Financial Stability Board (FSB) published a note seeking comment on aspects of CCP resolution that are considered essential to effective resolution strategies.

“With CCPs being an increasingly important part of the financial system through their ability to mitigate and manage counterparty credit risk, particularly following post-crisis reforms to mandate central clearing of certain standardized over-the-counter derivatives, it is vital that CCPs do not themselves become a new source of too-big-to-fail risk,” the FSB warns.

“In some areas, further guidance may be required to assist jurisdictions with implementing effective resolution regimes and to assist resolution authorities with developing credible resolution strategies and plans,” the FSB says, adding that it plans to consult on proposals for standards or guidance by early 2017.

“CCPs form a central part of the post-crisis reforms of OTC derivatives markets to help reduce risk in the financial system. But we must also ensure that CCPs are themselves robust and this includes appropriate resolution regimes,” says Elke König, chairwoman of the FSB resolution steering group and chair of the European Single Resolution Board. “There has already been much industry comment on CCP resolution, and we welcome further public comment in response to this discussion note to support the work of the FSB as part of the overall CCP workplan.”

Looking ahead, IOSCO and the CPMI intend to conduct a follow-up targeted review of CCPs’ progress in addressing the most important issues identified in the report in 2017.

Comments on the proposed guidance are due by October 18.