Derivative clearinghouses lack capital to recover from major losses, traders say

28 February 2019 10:20pm
Most derivative clearinghouses aren’t required to keep enough capital to recover from major but non-fatal losses stemming from cyber-attacks, fraud or the like, traders and clearing banks said.

Three major banking groups told the international Financial Stability Board that clearinghouses, also known as central counter-parties, generally manage risks that lead to these kinds of “non-default losses” and should be held responsible.

“We believe that CCPs should be well capitalized commensurate with their risks and that current CCP capital requirements in most jurisdictions are too low,” said the recent letter from the International Swaps and Derivatives Association, Futures Industry Association and Institute of International Finance.