MFA and AIMA Submit Joint Letter about FSB Consultation on Key Attributes of Resolution Regimes for Non-Bank Financial Institutions

The MFA and AIMA submitted a joint comment letter to IOSCO in response to its consultative document on the "Application of the Key Attributes of Effective Resolution Regimes to Non-Bank Financial Institutions." In the letter, the MFA and AIMA noted that the most effective regulatory framework to ensure that a central counterparty ("CCP") is never subject to a resolution regime is one that focuses on preventing CCP failure ex ante. The MFA and AIMA emphasized key assertions that included the following:

• ex ante measures should be used to address the relatively remote risk of a CCP's failure;
• the use of client margin haircutting as a loss allocation tool during the resolution of a CCP is antithetical to the agreed G20 objectives and would place burdens disproportionately upon clients; and
• maximizing transparency at all stages of a CCP resolution is vital to ensuring predictability for market participants and, therefore, maximizing the orderliness of the CCP's failure.

See: MFA and AIMA Joint Letter; Press Release.Related news: CPSS and IOSCO Issue Advisory Document on Quantitative Disclosure by Central Counterparties (with Lofchie Comment) (October 15, 2013).