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ESMA’s stress test of Central Counterparties finds clearing system resilient
09 July 2024
CCP
Press Releases
The European Securities and Markets Authority (ESMA), the EU’s financial markets regulator and supervisor, has published the results of its fifth stress test exercise for Central Counterparties (CCPs). The results confirm the overall resilience of European Union (EU) CCPs, as well as third-country Tier 2 CCPs, to core credit and liquidity financial risks under the tested scenarios.
New in this year’s exercise is the exploratory analysis of climate risk. The exercise also included additional market stress scenarios, enhanced model risk assessments for concentration, and extended reverse stress tests for credit and liquidity.
Klaus Löber, Chair of the CCP Supervisory Committee, said:
“ESMA’s fifth stress test confirmed the overall resilience of the European clearing landscape to severe credit and liquidity stress scenarios. However, we still have identified areas in which certain CCPs may need to strengthen their risk management frameworks, or where further supervisory work should be prioritised, including on modelling of concentration.”
“The stability of the EU financial system relies on resilient CCPs, and the ESMA stress test is a key supervisory tool to identify and mitigate potential risks to financial stability.”
ESMA finds:
CCPs have robust lines of defence to withstand significant market shocks in combination with the default of the two clearing member groups with the largest exposures;
CCPs are also resilient to substantial liquidity stress events, while CCPs’ clearing, and investment activities play a key role in the results;
Some gaps persist in the coverage of concentration risk across CCPs and across asset classes, notably for commodity derivative positions;
For climate risk, CCPs’ exposures depend on whether the markets they clear are directly exposed to transition risk, such as commodities and energy. The majority of sampled CCPs have started to integrate climate risk into their stress testing framework;
The ecosystem analysis provided insights into the CCPs’ and clearing members’ resources and showed that the total amount of required margin increased by 56% compared to the last exercise.
CCP stress test scenarios and outcomes
A total of 16 CCPs were covered by the exercise, including two UK CCPs qualifying as Tier 2 CCPs and all authorised EU CCPs. It assessed credit and concentration risk, liquidity risk, and included a new climate risk component. The exercise was complemented by an enhanced clearing ecosystem analysis.
Next steps
In line with the EMIR mandate, where the assessments exposed shortcomings in the resilience of one or more CCPs, ESMA will issue the necessary recommendations.
Further information:
Sarah Edwards
Senior Communications Officerpress@esma.europa.eu
09/07/2024
ESMA91-1505572268-3627
5th CCP Stress Test Report
09/07/2024
ESMA91-1505572268-3847
5th CCP Stress Test FAQ
09/07/2024
ESMA71-545613100-2541
ESMA’s stress test of Central Counterparties finds clearing system resilient - Press Release
CSDR Refit: ESMA consults on rules to recalibrate and further clarify the framework
09 July 2024
Post Trading
The European Securities and Markets Authority (ESMA), the EU’s financial markets regulator and supervisor, is launching today new consultations on different aspects of the Central Securities Depositories Regulation (CSDR) Refit. The proposed rules relate to the information to be provided by European CSDs to their national competent authorities (NCAs) for the review and evaluation, the information to be notified to ESMA by third-country CSDs, and the scope of settlement discipline.
The draft rules are set out in three separate consultation papers, covering:
The review and evaluation process of EU CSDs, suggesting a harmonisation of the information to be shared by CSDs on their cross-border activities and the risks to be considered by the relevant authorities for the purpose of feeding the overall assessment of the competent authorities;
Third country CSDs, where ESMA is proposing to streamline the information to be notified, aiming for an accurate understanding of the provision of notary, central maintenance and settlement services in the Union, limiting the reporting burden; and
The scope of settlement discipline, covering ESMA’s proposals on the underlying cause of settlement fails that are considered as not attributable to the participants in the transaction, and the circumstances in which operations are not considered as trading.
The CSDR Refit aims to fine-tune and further clarify the CSDR framework. All the policy mandates under consultation today will contribute towards the effective recalibration of the CSDR regime.
Next Steps
ESMA invites EU CSDs, third-country CSDs, CSD participants, as well as any stakeholders that may be impacted by the CSDR settlement discipline to respond to these three consultation papers by 9 September 2024.
Following the consultation, the responses will be assessed to finalise the respective proposals, before submission to the European Commission in Q1 2025. Other consultations about other aspects of CSRD will follow in the coming months.
Further information:
Cristina Bonillo
Senior Communications Officerpress@esma.europa.eu
09/07/2024
ESMA74-2119945925-1984
Consultation Paper on the Draft RTS on the information notified by third-country CSDs
09/07/2024
ESMA74-2119945925-1976
Consultation Paper on the Technical Advice on the Scope of CSDR Settlement Discipline
09/07/2024
ESMA74-2119945925-1996
Consultation Paper on the Draft technical standards amending Regulation (EU) 2017/392 and Regulation (EU) 2017/394 under CSDR on review and evaluation
CSDR Refit: Consultation on rules to recalibrate and further clarify the framework
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