Guidance on Central Counterparty Resolution and Resolution Planning
This consultation sets out draft Guidance on resolution and resolution planning for central counterparties (CCPs). With CCPs an increasingly important part of the financial system, particularly following post-crisis reforms to mandate central clearing of certain standardised over-the-counter derivatives, it is vital that CCPs do not themselves become a new source of “too-big-to-fail risk”.
The FSB issued a discussion note in August 2016 on essential aspects of CCP resolution planning. The draft Guidance was informed by responses to the discussion note. The draft Guidance builds on the FSB Key Attributes of Effective Resolution Regimes for Financial Institutions (Key Attributes) which sets out a framework for resolution of financial market infrastructures (FMI). This framework states the objectives of FMI resolution and a range of powers and tools that should be made available to resolution authorities to resolve a failing FMI. When finalised, the guidance will assist authorities and jurisdictions with implementing effective resolution regimes and developing credible resolution strategies and plans for CCPs.
The Guidance covers a number of aspects of CCP resolution planning which authorities should consider when developing frameworks for resolving failing CCPs, including:
- policy objectives for CCP resolution planning to maintain financial stability;
- powers that resolution authorities should have to ensure the effective resolution of CCPs, including potential indicators for considering when a CCP should enter resolution;
- use of loss allocation tools in resolution and provisions necessary to protect creditor rights so the triggering of resolution by authorities does not leave creditors worse off than if the authorities had not stepped in; and
- steps authorities should take for CCP resolution planning including assessing resolvability and considerations about the formation of crisis management groups for systemically important CCPs.
The guidance will be finalised in June 2017 in advance of the G20 Leaders’ Summit. The FSB will undertake further work on financial resources for CCP resolution and, based on further analysis and experience gained in resolution planning, determine by end-2018 whether it should develop further guidance on this issue.
The FSB welcomes comments and responses to the questions set out in the consultative document by Monday, 13 March 2017. Responses should be sent to [email protected]. Responses will be published on the FSB website unless respondents expressly request otherwise.