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.