Resilience of central counterparties (CCPs): Further guidance on the PFMI - Final report

CPMI Papers  |  No 163  | 
05 July 2017

CCPs have become increasingly critical components of the financial system in recent years, due in part to the introduction of mandatory central clearing for standardised over-the-counter derivatives in some jurisdictions. It is, therefore, vital that each CCP is sufficiently resilient to withstand clearing member failures and other stress events.

The final report on Resilience of central counterparties (CCPs): Further guidance on the PFMI aims to improve the resilience of CCPs by providing guidance on the principles and key considerations in the Principles for Financial Market Infrastructures (PFMI) regarding financial risk management for CCPs. The report focuses on five key aspects of a CCP's financial risk management framework: governance, stress testing for both credit and liquidity exposures, coverage, margin, and a CCP's contribution of its financial resources to losses. The guidance should be understood in the context of the principles-based approach reflected in the PFMI, which recognises CCPs' differing organisations, functions and designs, and the different ways to achieve a particular result.

The guidance is not intended to impose additional standards for CCPs beyond those set out in the PFMI. However, CCPs may need to make changes to their rules, procedures, governance arrangements and risk management frameworks in order for practices to be consistent with the guidance. Relevant authorities may also determine that it is necessary to make changes to their regulatory frameworks. CCPs should promptly identify any areas where changes are necessary, and address them as soon as practicable, so that implementation of the necessary changes is completed no later than the end of 2017.