In a monthly meeting of the European Association of CCP Clearing Houses (EACH), the organization discussed the recent plans to amend certain elements of the banking recovery and resolution framework. The association supports the inclusion of a clause which stipulates the exclusion by resolution authorities of liabilities arising from derivatives cleared and settled through an authorized central counterparty.
EACH added that including CCPs in the bail-in provision would substantially reduce the effectiveness of a CCP’s default procedures in the case of a member default. A CCP would be unable to liquidate a position with a failed clearing member which is subject to bail-in provisions. This would place the CCP in a position where it holds an un-matched book, increasing systemic risks and the risk of contagion to other market participants.
“This important exclusion prevents potential damage to the stability of CCPs and
consequently to the financial system and is consistent with the default management procedures in EMIR,” explained Marcus Zickwolff, Chairman.
The association also confirmed the replacement of board member Rory Cunningham, LCH.Clearnet, by his colleague Perrine Herrenschmidt, head of public affairs at LCH.Clearnet.
EACH Urges Exemption of CCPs From Bail-In Provisions
In a monthly meeting of the European Association of CCP Clearing Houses (EACH), the organization expressed support of the inclusion of a clause which stipulates the exclusion by resolution authorities of liabilities arising from derivatives cleared and settled through an authorized central counterparty.
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