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The European Securities and Markets Authority issued its final report on systemic risk and cost implications of interoperable arrangements between central clearing houses established under the European Market Infrastructure Regulatio.
Aan assessment of the benefits and impacts on costs for the relevant parties is included. The last section is dedicated to the prudential analysis at CCP level and the risk management tools used to mitigate the potential risks arising from interoperability, including some quantitative data. The key risk under consideration is the counterparty credit risk resulting from exposures between interoperable CCPs. Whilst there are scenarios under which under-collateralisation can materialise, EMIR and ESMA Guidelines and Recommendations address how these cases should be catered for via inter-CCP arrangements. Along those lines, the evidence collected on the current CCP practices show that EU CCPs have set-up mechanisms to adequately mitigate potential risk of under-collateralisation, even in cases where re-use is permitted.
This report is being submitted to the EC and is expected to feed into the report on any possible systemic risk and cost implications of interoperability arrangements that the European Commission shall prepare and submit to the European Parliament and the Council.