The CCP-bank nexus in the time of Covid-19

BIS Bulletin  |  No 13  | 
11 May 2020
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Key takeaways

  • During the Covid-19-induced financial turbulence, central counterparties (CCPs) issued large margin calls, weighing on the liquidity of clearing member banks.
  • In spite of the turbulence, CCPs remained resilient, as intended by the post-crisis reforms of financial market infrastructures.
  • Higher margins should be expected during heightened turbulence, but the extent of the procyclicality of margining is the consequence of various design choices.
  • Systemic considerations call to examine the nexus between banks and CCPs. Therefore, when thinking about margining, central banks need to assess banks and CCPs jointly rather than in isolation.