Measuring system-wide resilience of central counterparties

Central clearing has the potential to improve transparency and risk management across the financial system. It also creates new dependencies between firms. Stress tests are now a common tool used by central counterparties (CCPs) to evaluate their resilience in the face of losses caused by the default of their clearing members. Determining the resiliency of the entire system of CCPs and clearing members, however, requires a combined supervisory stress test across both CCPs and their clearing members. We propose a framework for extending existing stress test results obtained at individual CCPs to create a system-wide stress test.