ESMA provides feedback on how CCPs should consider internal risk
04 July 2018 Paris
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The European Â鶹´«Ã½ and Markets Authority (ESMA) has published its opinion which sets out how central counterparties (CCPs) in the EU should consider in their internal risk models the liquidity risk posed by all entities towards which the CCP has a liquidity exposure.
The opinion, published under the European Markets Infrastructure Regulation, details ESMA’s view on how CCPs should assess liquidity risk, and by so doing promotes convergent risk management practices and risk control across EU.
This opinion outlines the assessment of the liquidity risk posed by liquidity providers regardless of whether or not these were a clearing member.
ESMA clarifies that CCPs should include, in the measurement of their liquidity needs, the default of their top two clearing members in all their capacities vis-Ã -vis the CCP.
ESMA stated this should be done in addition to assessing in their stress testing scenarios, all entities towards which the CCP has a liquidity exposure.
ESMA’s opinion is addressed to competent authorities responsible for CCP supervision.
The opinion, published under the European Markets Infrastructure Regulation, details ESMA’s view on how CCPs should assess liquidity risk, and by so doing promotes convergent risk management practices and risk control across EU.
This opinion outlines the assessment of the liquidity risk posed by liquidity providers regardless of whether or not these were a clearing member.
ESMA clarifies that CCPs should include, in the measurement of their liquidity needs, the default of their top two clearing members in all their capacities vis-Ã -vis the CCP.
ESMA stated this should be done in addition to assessing in their stress testing scenarios, all entities towards which the CCP has a liquidity exposure.
ESMA’s opinion is addressed to competent authorities responsible for CCP supervision.
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