Central Counterparties Addressing Their Too Important To Fail Nature

Author : Froukelien Wendt
Publisher : International Monetary Fund
Page : 25 pages
File Size : 55,7 Mb
Release : 2015-01-27
Category : Business & Economics
ISBN : 9781475572933

Get Book

Central Counterparties by Froukelien Wendt Pdf

Central counterparties (CCPs) can offer significant benefits to a market. However, CCPs are also highly interconnected with financial institutions and markets and therefore too important to fail. The increased volumes cleared through CCPs and their increasing global scope, in particular in the OTC derivatives market, make it even more important that systemic risks related to CCPs are managed. This paper argues that the current set of international policy measures does partly address these risks, but that alternative policy measures are needed to reduce remaining systemic risks. For example, the paper recommends network analysis to be conducted by CCPs and authorities to gauge potential losses and suggests a common international approach to central bank services to help reduce the dependency of CCPs on services provided by commercial banks.

Author : Group of Ten. Committee on Payment and Settlement Systems
Publisher : Unknown
Page : 80 pages
File Size : 44,9 Mb
Release : 2004
Category : Clearing of securities
ISBN : IND:30000116787171

Get Book

Recommendations for Central Counterparties by Group of Ten. Committee on Payment and Settlement Systems Pdf

Author : Mr.Manmohan Singh
Publisher : International Monetary Fund
Page : 17 pages
File Size : 49,9 Mb
Release : 2010-04-01
Category : Business & Economics
ISBN : 9781451982763

Get Book

Collateral, Netting and Systemic Risk in the OTC Derivatives Market by Mr.Manmohan Singh Pdf

To mitigate systemic risk, some regulators have advocated the greater use of centralized counterparties (CCPs) to clear Over-The-Counter (OTC) derivatives trades. Regulators should be cognizant that large banks active in the OTC derivatives market do not hold collateral against all the positions in their trading book and the paper proves an estimate of this under-collateralization. Whatever collateral is held by banks is allowed to be rehypothecated (or re-used) to others. Since CCPs would require all positions to have collateral against them, off-loading a significant portion of OTC derivatives transactions to central counterparties (CCPs) would require large increases in posted collateral, possibly requiring large banks to raise more capital. These costs suggest that most large banks will be reluctant to offload their positions to CCPs, and the paper proposes an appropriate capital levy on remaining positions to encourage the transition.

Author : José Vinãls,Ceyla Pazarbasioglu,Jay Surti,Aditya Narain,Mrs.Michaela Erbenova,Mr.Julian T. S. Chow
Publisher : International Monetary Fund
Page : 27 pages
File Size : 44,5 Mb
Release : 2013-05-14
Category : Business & Economics
ISBN : 9781484340943

Get Book

Creating a Safer Financial System by José Vinãls,Ceyla Pazarbasioglu,Jay Surti,Aditya Narain,Mrs.Michaela Erbenova,Mr.Julian T. S. Chow Pdf

The U.S., the U.K., and more recently, the E.U., have proposed policy measures directly targeting complexity and business structures of banks. Unlike other, price-based reforms (e.g., Basel 3 and G-SIFI surcharges), these proposals have been developed unilaterally with material differences in scope, design and implementation schedules. This may exacerbate cross-border regulatory arbitrage and put a further burden on consolidated supervision and cross-border resolution. This paper provides an analysis of the potential implications of implementing different structural policy measures. It proposes a pragmatic and coordinated approach to development of these policies to reduce risk of regulatory arbitrage and minimize unintended consequences. In doing so, it also aims to identify a set of common policy measures that countries could adopt to re-scope bank business models and corporate structures.

Author : Marc Dobler,Mr.Simon Gray,Diarmuid Murphy,Bozena Radzewicz-Bak
Publisher : International Monetary Fund
Page : 63 pages
File Size : 50,8 Mb
Release : 2016-01-22
Category : Business & Economics
ISBN : 9781513567785

Get Book

The Lender of Last Resort Function after the Global Financial Crisis by Marc Dobler,Mr.Simon Gray,Diarmuid Murphy,Bozena Radzewicz-Bak Pdf

The global financial crisis (GFC) has renewed interest in emergency liquidity support (sometimes referred to as “Lender of Last Resort”) provided by central banks to financial institutions and challenged the traditional way of conducting these operations. Despite a vast literature on the topic, central bank approaches and practices vary considerably. In this paper we focus on, for the most part, the provision of idiosyncratic support, approaching it from an operational perspective; highlighting different approaches adopted by central banks; and also identifying some of the issues that arose during the GFC.

Author : Ligia Catherine Arias-Barrera
Publisher : Routledge
Page : 280 pages
File Size : 41,6 Mb
Release : 2018-05-11
Category : Business & Economics
ISBN : 9781351797719

Get Book

Regulation and Supervision of the OTC Derivatives Market by Ligia Catherine Arias-Barrera Pdf

The over-the-counter (OTC) derivatives market has captured the attention of regulators after the Global Financial Crisis due to the risk it poses to financial stability. Under the post-crisis regulatory reform the concentration of business, and risks, among a few major players is changed by the concentration of a large portion of transactions in the new market infrastructures, the Central Counterparties (CCPs). This book, for the first time, analyses the regulatory response of the United Kingdom and the United States, the two largest centres of OTC derivatives transactions, and highlights their shortcomings. The book uses a normative risk-based approach to regulation as a methodological lens to analyse the UK regime of CCPs in the OTC derivatives market. It specifically focuses on prudential supervision and conduct of business rules governing OTC derivatives transactions and the move towards enhancing the use of central clearing. The resulting analysis, from a normative risk based approach, suggests that the UK regime for CCPs does not fulfil what would be expected if a coherent risk based approach was taken. Our comments on the Dodd-Frank Act highlight that the incoherent adoption of risk-based approach to regulation affects the effectiveness of the US regime for CCPs. Such a regime does not follow the pace of events of ‘innovation risk’; in particular, the foreseeable changes FinTech will bring to the OTCDM and central clearing services. The second inadequacy of the US regime concerns the dual regulatory structure of the CFTC and the SEC, and the inadequate adoption of different and not well-coordinated regulatory strategies. We also analyse the cross-border implications of the US regime for non-US CCPs that provide clearing services to US market participants. Finally, we study the negative effects of the absence of a clearly defined resolution regime for CCPs.

Author : Francesco Pennesi
Publisher : Springer Nature
Page : 276 pages
File Size : 45,9 Mb
Release : 2022-04-24
Category : Business & Economics
ISBN : 9783030992699

Get Book

Equivalence in Financial Services by Francesco Pennesi Pdf

Equivalence in Financial Services offers a comprehensive and cross-industry examination of the rules and procedures under EU financial legislation dedicated to third-country market actors. The equivalence regime has become particularly topical after Brexit, as the United Kingdom is now a third country from the perspective of the European Union. This book investigates whether the current equivalence system is fit for its purpose, namely facilitating cross-border finance while minimizing as extensively as possible financial risks. After describing how the European Commission adopts equivalence measures, the book examines the implementation of the equivalence regime for the following entities: Credit Rating Agencies, Benchmarks, Trading Venues, Investment Firms, Investment Funds, Central Securities Depositories, Trade Repositories, and Central Counterparties. Addressing the most recent policy and legal developments, Equivalence in Financial Services provides an insightful guide into this complex area of financial regulation for scholars of financial regulation, legal practitioners, and policy makers.

Author : Iris H.-Y. Chiu,Iain G. MacNeil
Publisher : Edward Elgar Publishing
Page : 488 pages
File Size : 45,7 Mb
Release : 2024-06-12
Category : Electronic
ISBN : 9781785362637

Get Book

Research Handbook on Shadow Banking by Iris H.-Y. Chiu,Iain G. MacNeil Pdf

Research Handbook on Shadow Banking brings together a range of international experts to discuss shadow banking activities, the purposes they serve, the risks they pose to the financial system and implications for regulators and the regulatory perimeter. Including discussions specific to the UK, European Union, US, China and Singapore, this book offers high level and theoretical perspectives on shadow banking and regulatory risks, as well as more detailed explorations of specific markets in shadow banking.

Author : Mr.Manmohan Singh,Dermot Turing
Publisher : International Monetary Fund
Page : 23 pages
File Size : 54,9 Mb
Release : 2018-03-20
Category : Business & Economics
ISBN : 9781484347300

Get Book

Central Counterparties Resolution—An Unresolved Problem by Mr.Manmohan Singh,Dermot Turing Pdf

Recovery and resolution regimes are being developed for central counterparties (CCPs). We analyse current resolution tools in the context of policy, which is to restore the critical functions of a failed CCP. We conclude that the toolkit is insufficient to avoid the costs of resolution being borne by taxpayers, and propose alternative policy suggestions for addressing the problem of a failed CCP.

Author : George A Papaconstantinou
Publisher : Bloomsbury Publishing
Page : 317 pages
File Size : 44,6 Mb
Release : 2024-01-25
Category : Law
ISBN : 9781509966776

Get Book

Financial Market Infrastructure and Economic Integration by George A Papaconstantinou Pdf

This book is the first comprehensive study of the interplay between the cutting-edge regulation of financial infrastructure and international economic integration. It tackles a series of important questions: How does the regulation of central counterparties interact with international economic law? Is the WTO able to deal with the regulatory diversity of each country's financial rulebook? Do FTAs foster deeper integration of financial infrastructure services? Can competition law effectively tackle monopolisation and anti-competitive conduct in financial infrastructure? The book discusses how the liberalisation of financial market infrastructure is achieved within the most prominent international economic integration settings: the WTO, Economic Integration Agreements, and EU competition law. It explores whether a more harmonious relationship between financial regulation and economic integration is feasible, and how it can be achieved. The book demonstrates the existence of both structural barriers to trade and trade-facilitating tools that can impede and foster the further integration of financial market infrastructure. Measuring the depth of liberalisation of financial market infrastructure services in more than 120 FTAs, as well as surveying recent case law of the WTO, the Court of Justice of the European Union, and the practice of the European Commission, the book shows how the economic integration of financial market infrastructure occurs. An essential read for those seeking to understand how the cutting-edge regulation of financial market infrastructure and transnational systems of economic integration interact with one another.

Author : International Monetary Fund. Fiscal Affairs Dept.,International Monetary Fund. Monetary and Capital Markets Department
Publisher : International Monetary Fund
Page : 64 pages
File Size : 52,9 Mb
Release : 2013-10-06
Category : Business & Economics
ISBN : 9781498341714

Get Book

Key Aspects of Macroprudential Policy - Background Paper by International Monetary Fund. Fiscal Affairs Dept.,International Monetary Fund. Monetary and Capital Markets Department Pdf

The countercyclical capital buffer (CCB) was proposed by the Basel committee to increase the resilience of the banking sector to negative shocks. The interactions between banking sector losses and the real economy highlight the importance of building a capital buffer in periods when systemic risks are rising. Basel III introduces a framework for a time-varying capital buffer on top of the minimum capital requirement and another time-invariant buffer (the conservation buffer). The CCB aims to make banks more resilient against imbalances in credit markets and thereby enhance medium-term prospects of the economy—in good times when system-wide risks are growing, the regulators could impose the CCB which would help the banks to withstand losses in bad times.

Author : Mr.Stijn Claessens,Ms.Laura E. Kodres
Publisher : International Monetary Fund
Page : 39 pages
File Size : 50,9 Mb
Release : 2014-03-14
Category : Business & Economics
ISBN : 9781484335970

Get Book

The Regulatory Responses to the Global Financial Crisis by Mr.Stijn Claessens,Ms.Laura E. Kodres Pdf

We identify current challenges for creating stable, yet efficient financial systems using lessons from recent and past crises. Reforms need to start from three tenets: adopting a system-wide perspective explicitly aimed at addressing market failures; understanding and incorporating into regulations agents’ incentives so as to align them better with societies’ goals; and acknowledging that risks of crises will always remain, in part due to (unknown) unknowns – be they tipping points, fault lines, or spillovers. Corresponding to these three tenets, specific areas for further reforms are identified. Policy makers need to resist, however, fine-tuning regulations: a “do not harm” approach is often preferable. And as risks will remain, crisis management needs to be made an integral part of system design, not relegated to improvisation after the fact.

Author : Mr. Manmohan Singh
Publisher : International Monetary Fund
Page : 16 pages
File Size : 51,5 Mb
Release : 2014-11-12
Category : Business & Economics
ISBN : 9781498340151

Get Book

Limiting Taxpayer “Puts”—An Example from Central Counterparties by Mr. Manmohan Singh Pdf

Nonbanks such as central counterparties (CCPs) are a useful lens to see how regulators view the role of the lender-of-last-resort (LOLR). This paper explores the avenues available when a nonbank failure is likely, specifically by considering the options of keeping CCPs afloat. It is argued that CCPs have, by regulatory fiat, become “too important to fail,” and thus the imperative should be greater loss-sharing by all participants that better align the distribution of risks and rewards of CCPs, the clearing members and derivative end-users. In the context of LOLR, the proposed variation margin gains haircut (VMGH) is discussed as a way of limiting the taxpayer put.

Author : Dermot Turing
Publisher : Bloomsbury Publishing
Page : 751 pages
File Size : 52,8 Mb
Release : 2021-02-12
Category : Law
ISBN : 9781526514981

Get Book

Clearing and Settlement by Dermot Turing Pdf

The post-trading industry is one in which financial firms make money and one in which risk issues need careful management. Reliable payment, clearing and settlement structures are perceived to be essential to enable financial firms to withstand shocks. A great deal of the cost of trading and cross-border investment is attributed to the very complex process of clearing and settlement. This book describes and explains: 1. what happens in clearing and settlement, and the roles of (and risks assumed by) the various participants in the post-trade marketplace 2. the law applicable to infrastructures, how they are are regulated, and the other topographical features of their legal landscape 3. the legal and practical aspects of risk management and operations of infrastructures 4. the risks faced by participants in payment, clearing and settlement systems - the agent banks - along with practical and operational issues which they face in their roles. Fully revised, updates for the 3rd edition include: - Implications and impact of Brexit - CPMI and IOSCO paper on central counterparty default (CCP) management auctions - cyber-security and the resilience of financial market infrastructures (FMIs) and the wider market ecosystem.

Author : Eric Helleiner,Stefano Pagliari,Irene Spagna
Publisher : Oxford University Press
Page : 336 pages
File Size : 55,6 Mb
Release : 2018-02-07
Category : Political Science
ISBN : 9780190864583

Get Book

Governing the World's Biggest Market by Eric Helleiner,Stefano Pagliari,Irene Spagna Pdf

In the wake of the 2008 global financial crisis, the regulation of the world's enormous derivatives markets assumed center stage on the international public policy agenda. Critics argued that loose regulation had contributed to the momentous crisis, but lasting reform has been difficult to implement since. Despite the global importance of derivatives markets, they remain mysterious and obscure to many. In Governing the World's Biggest Market, Eric Helleiner, Stefano Pagliari, and Irene Spagna have gathered an international cast of contributors to rectify this relative neglect. They examine how G20 governments have developed a coordinated international agenda to enhance control over these markets, which had been allowed to grow largely unchecked before the crisis. In analyzing this reform agenda, they advance three core arguments: first, the agenda to rein in these enormous markets has many limitations; second, the reform process has been plagued by delays, inconsistencies, and tensions that fragment the governance of these markets; and third, the politics driving the reforms have been extremely complicated. An authoritative overview of how this vast system is governed, Governing the World's Biggest Market looks at how the goals, limitations, and outcomes of post-crisis initiatives to regulate these markets have been influenced by a complex combination of transnational, inter-state, and domestic political dynamics. Moreover, this volume emphasizes how crucial regulatory reform is to stabilizing the global economy long-term.