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In 2009, the G20 Leaders committed to ensuring that all standardised OTC derivatives contracts are cleared through central counterparties (“CCPs”).
Fully realising the benefits of CCPs requires CCPs to be subject to strong regulatory, oversight and supervisory requirements. First, CCPs must be sufficiently resilient in the sense that risk management standards and financial resources (including stress testing, margin requirements, pre-funded default funds, and liquidity resources) allow CCPs to understand and mitigate risks, and to withstand clearing member failures and other stress events to a very high probability. Second, CCPs must have recovery plans that allow them to allocate excess losses and generate additional liquidity to safeguard their own viability without endangering the stability of clearing members and other financial institutions, many of whom are likely to be systemically important in their own right. And third, there must be credible CCP resolution plans in place.
The Basel Committee on Banking Supervision (BCBS), the Committee on Payments and Markets Infrastructures (CPMI), the Financial Stability Board (FSB), and the International Organization of Securities Commissions (IOSCO), and together with the BCBS, CPMI, and FSB (the “Committees”), agreed a workplan to coordinate their respective international policy work aimed at enhancing the resilience, recovery planning and resolvability of CCPs, and to work in close collaboration.
To support these efforts, the Committees also agreed to establish a joint study group to identify, quantify and analyse interdependencies between CCPs and major clearing members and any resulting systemic implications.
The agreed workplan focuses on CCPs that are systemic across multiple jurisdictions, consistent with the Istanbul Communiqué of the G20 Finance Ministers and Central Bank Governors.
A detailed timeline for completing this work is set out in Annex A.