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CCP recovery and resolution: preventing a financial catastrophe

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  • Randy Priem

Abstract

Purpose - This paper aims to discuss the European Commission’s proposal for a central counterparty (CCP) recovery and resolution regulation. In this respect, the paper comments the consequences, risks and attention points for CCPs and their authorities. Design/methodology/approach - This paper focuses on the proposed rules surrounding CCP recovery and resolution. The paper first familiarizes the reader with the risk management procedures currently obliged before discussing the resolution and recovery provisions foreseen in the proposal. Findings - The proposed regulation commands significant requirements for CCPs and for their regulators. Not only will CCPs have to draft a recovery plan but also a resolution authority will need to be assigned. The latter will have the task, in consultation with a resolution college, to draft a resolution plan. When a resolution is inevitable, authorities will need to assure the continuation of the CCP’s critical functions, thereby warranting financial stability and investor protection. Originality/value - To the best of the author’s knowledge, there are no other papers that provide a holistic overview of the newly proposed regulation and describe the choices to be made during a CCP’s resolution. This paper will be of interest to all CCPs and their stakeholders, such as their regulators, clearing members and their clients and other linked financial market infrastructures.

Suggested Citation

  • Randy Priem, 2018. "CCP recovery and resolution: preventing a financial catastrophe," Journal of Financial Regulation and Compliance, Emerald Group Publishing Limited, vol. 26(3), pages 351-364, July.
    • Handle: RePEc:eme:jfrcpp:jfrc-03-2017-0032
    DOI: 10.1108/JFRC-03-2017-0032
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    Citations

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    Cited by:

    1. Guter-Sandu, Andrei & Haas, Armin & Murau, Steffen, 2023. "Green Macro-Financial Governance in the European Monetary Architecture: Assessing the Capacity to Finance the Net-Zero Transition," SocArXiv 4mb2q, Center for Open Science.
    2. Berndsen, Ron, 2020. "Five Fundamental Questions on Central Counterparties," Discussion Paper 2020-028, Tilburg University, Center for Economic Research.
    3. Ron Berndsen, 2021. "Fundamental questions on central counterparties: A review of the literature," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 41(12), pages 2009-2022, December.
    4. Huertas, Thomas F., 2020. "Plug the gap: Make resolution ready for corona," SAFE White Paper Series 73, Leibniz Institute for Financial Research SAFE.

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