FDIC Chair Highlights Initiatives to Enhance Clearinghouse Resolution Processes
FDIC Acting Chair Martin J. Gruenberg highlighted regulatory efforts to enhance central counterparties' ("CCP") resolvability to minimize the risk of financial instability.
In an address before the National Securities Market Commission, the securities regulator in Spain, Mr. Gruenberg emphasized the foundational role of regulatory authorities to manage the orderly resolution of systemically important financial institutions. Mr. Gruenberg, who also leads the Resolution Steering Group ("ReSG") of the Financial Stability Board, noted that post-2008 G20 reforms have resulted in a "dramatically increased" share of derivatives cleared through CCPs, and he underscored the systemic importance of such entities.
Mr. Gruenberg highlighted the efforts of the ReSG to address CCP resolvability, including November 2020 guidance for regulators assessing CCP financial resources and 2021 resolvability assessments. Looking forward, Mr. Gruenberg said that the ReSG is analyzing potential alternative financial resources to support resolution, including developing cost-benefit analyses. A report on that topic is expected by the end of 2022.
Commentary
Writing rules and procedures for CCP resolution and recovery may be an impossible task, or at least one where it is extremely difficult to come up with specific ways to address unforeseen circumstances. In any event, governments should take responsibility for further addressing the situation; as Mr. Gruenberg notes, the increased systemic importance of CCPs is driven by the governmental decision to mandate clearing.