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Skin in the Game – Central Counterparty Risk Controls and Incentives

Author

Listed:
  • Louise Carter

    (Reserve Bank of Australia)

  • Megan Garner

    (Reserve Bank of Australia)

Abstract

The increasing systemic importance of central counterparties (CCPs) has seen recent policy debates focus on the ability of CCPs to withstand a crisis effectively. CCPs maintain prefunded financial resources to cover the potential losses arising from the default of a clearing participant. This article discusses the incentives created by the composition of these resources, and draws out the role of transparency and governance in ensuring these incentives are effective.

Suggested Citation

  • Louise Carter & Megan Garner, 2015. "Skin in the Game – Central Counterparty Risk Controls and Incentives," RBA Bulletin (Print copy discontinued), Reserve Bank of Australia, pages 79-88, June.
    • Handle: RePEc:rba:rbabul:jun2015-09
    as

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    File URL: https://www.rba.gov.au/publications/bulletin/2015/jun/pdf/bu-0615-9.pdf
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    References listed on IDEAS

    as
    1. Matt Gibson, 2013. "Recovery and Resolution of Central Counterparties," RBA Bulletin (Print copy discontinued), Reserve Bank of Australia, pages 39-48, December.
    2. Alexandra Heath & Gerard Kelly & Mark Manning, 2015. "Central Counterparty Loss Allocation and Transmission of Financial Stress," RBA Research Discussion Papers rdp2015-02, Reserve Bank of Australia.
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    Cited by:

    1. Wenqian Huang & Elöd Takáts, 2024. "Model Risk at Central Counterparties: Is Skin in the Game a Game Changer?," International Journal of Central Banking, International Journal of Central Banking, vol. 20(3), pages 161-184, July.

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