CCP Recovery and Resolution: How to avoid pro-cyclicality and increased systemic risk in distressed markets
The use of central counterparties (CCPs) has increased markedly in recent years. The decision to shift from bilateral to central clearing of standardised over-the-counter derivatives concentrates risks in a couple of CCPs, which has potentially negative effects on the financial sector and the broader economy in the unlikely event that a CCP fails.
The European Commission’s proposal for a recovery and resolution framework should address these risks, resolving distressed CCPs in an orderly manner without resorting to the use of taxpayers’ money. Two critical elements for the credibility of this framework are the distribution of the losses from the resolved CCP and the coordination of the resolution activities. These and other elements of the CCP resolution framework will be debated at the CEPS-ECMI conference on CCP Recovery and Resolution, hosted in Amsterdam by ABN AMRO Clearing. The conference will bring together policymakers, industry representatives and other experts.
Agenda
09:30 – 10:00 Registration and coffee
10:00 – 10:15 Welcome remarks by Boudewijn Duinstra, ABN AMRO Clearing
10:15 – 11:30 Sesssion I - Who should cover the losses in case of CCP resolution?
The Commission’s proposal gives the resolution authorities several options for distributing the remaining losses in the case of CCP resolution, including cash calls and variation margin gains haircuts (VMGH). Although this may avoid implicating taxpayers’ money, it may also change the behaviour of CCPs, their members and clients of the CCP members. How would the resolution losses be best covered? Should the creditor waterfall be further restricted or expanded? Is there a need for ex-ante disclosure of the waterfall?
Speakers
- Patrick Pearson, European Commission
- Stephen Fisher, BlackRock
- Willem Sprenkeler, Optiver
- Jan Bart De Boer, ABN AMRO Clearing
Moderator: Karel Lannoo, CEPS/ECMI
11:30 – 12:45 Session II - Will resolution colleges be equipped to resolve CCPs?
The proposal foresees a pivotal role for resolution authorities in the resolution framework. Together with other authorities such as the resolution authorities and supervisors of both the CCP and it’s clearing members, they gather in the resolution colleges to coordinate the preparation and execution of the CCP resolutions. Are resolution colleges an appropriate entity for timely and coordinated (cross-border) actions in resolution? Do these colleges have sufficient powers and means for effective resolution? Is the resolution framework Brexit-proof?
Speakers
- Cora van Nieuwenhuizen, Member of the European Parliament (VVD/ALDE)
- Elisabeth Ledrut, Single Resolution Board
- Ron Berndsen, De Nederlandsche Bank & Tilburg University
- Demetria O'Sullivan, ICE Clear Europe
Moderator: Karel Lannoo, CEPS/ECMI
12:45 – 13:00 Wrap up & closing remarks by Karel Lannoo, CEPS/ECMI and Jan Bart De Boer, ABN AMRO Clearing
13:00 – 14:00 Sandwich lunch
Registration
- Participation in the event is free of charge.