CCPs warn of overly tough risk management rules

European clearing houses have objected to a consultation on implementing a more prescriptive risk management regime.

In a response to a consultative report from CPMI-IOSCO on central counterparty (CCP) resilience and recovery, the European Association of CCP Clearing Houses (EACH) said the proposals “may ultimately restrict a CCP’s ability to appropriately manage risk, especially in times of high volatility or market stress.”

The clearing houses have called for guidance on procyclical risk management to take a more outcomes and principles based approach, as is usually favoured in Europe, rather than significantly proscribing the use of certain tools.

EACH also pointed out that CCPs already make significant information available to relevant parties and should not be called on to provide even more disclosure, stating the current regime was sufficient.

The association also objected to new guidance on recovery planning, saying that outlined in the CPMI-IOSCO Recovery Report in late 2014 already provided sufficient and appropriate guidance.

Clarification was also sought on several other issues, including the role of CCP boards in their governance structure, stating it “would be overly demanding to expect any Board to maintain the necessary expertise and skillset to undertake the day-to-day management of the CCP. Requiring the Board to do so would diminish the value of its independence, as the Board would be performing the role of the management.”