The Committee on Payments and Market Infrastructures (CPMI) and the International Organisation of Securities Commissions (IOSCO) yesterday said they are undertaking a review of stress testing by central counter-parties (CCPs). Stress testing is an essential component of risk management by CCPs.
The Principles for Financial Market Infrastructures (PFMI), published by the CPMI and IOSCO in 2012, require CCPs to carry out rigorous stress testing to determine the financial resources they need to manage both credit and liquidity risk, including a wide range of stress scenarios covering a variety of extreme but plausible market conditions.
The systemic importance of CCPs is growing substantially, not least due to the drive for standardised OTC derivatives to be centrally cleared. The CPMI and IOSCO therefore believe that a review of CCP stress testing is timely in order to identify how the relevant PFMI standards are being implemented and whether additional guidance in this area is needed. CCPs, clearing participants and other relevant stakeholders will be consulted in the course of the review.
IOSCO is the leading international policy forum for securities regulators and is recognised as the global standard setter for securities regulation. The organisation’s membership regulates more than 95 percent of the world’s securities markets in more than 115 jurisdictions and it continues to expand.
