Trade Groups Respond to FSB Consultation Paper on CCP Resources

In response to a Financial Stability Board ("FSB") Consultation Paper on the adequacy of central counterparty ("CCP") financial resources for recovery and resolution, three financial industry trade associations argued that a "better balance between loss allocation to clearing participants and loss allocation to CCPs would promote better outcomes from a resilience and financial stability perspective."

ISDA, the Institute of International Finance and the FIA emphasized the need to review the sufficiency of resources and adequacy of CCP capital to ensure risk management incentives are properly aligned. Further, they raised concerns that the "majority" of CCPs would require resolution in cyber theft scenarios. The associations added that they "would have welcomed the assessment of tools against a 'fairness' criterion and also the consideration of CCP equity, pre-positioned resolution resources, compensation to market participants, and a discussion of recapitalization."