Implementation monitoring of the PFMI: Level 3 assessment on general business risks

The Bank for International Settlements' Committee on Payments and Market Infrastructures (CPMI) and the International Organization of Securities Commissions (IOSCO) continue to closely monitor the implementation of the Principles for financial market infrastructures (PFMI).

This CPMI-IOSCO report reviews the implementation of the PFMI Principle 15 on general business risk at a sample of 34 financial market infrastructures (FMIs) from 27 jurisdictions, based on work carried out in 2023–24. The report identifies a number of serious issues of concern relating to:

• determining FMIs' needs for liquid net assets funded by equity (LNAFE) to cover potential losses arising from general business risk and for implementing plans for recovery and orderly wind-down
• holding LNAFE in addition to resources held for risks other than general business risk
• recovery and orderly wind-down planning for general business risk
• plans for raising additional equity in case of capital shortfalls

The report also highlights an issue of concern regarding the comprehensive identifiation, monitoring and management of sources of general business risk.

Collectively, these findings highlight clear challenges for FMIs' resilience to different types of risk that could result in general business losses and should be addressed with the highest priority.

The report also identifies observations that relate to differences in implementation outcomes across FMIs (rather than consistency with the PFMI), which could result in material differences in resilience across FMIs.