ISDA, the Futures Industry Association (FIA) and the Institute of International Finance (IIF) appreciate the opportunity to comment on the consultation paper “Financial resources to support CCP resolution and the treatment of CCP equity in resolution” and believe that the consultation paper is another welcome step towards developing CCP resolution regimes.
In our response, we make the following points:
Part I: Assessing the adequacy of financial resources to support CCP resolution
- The Associations support the five-step approach and more quantitative clarity
- The five-step process should be further developed into a CCP capital requirements framework
- The need for increased transparency and testing of the resolution plans
Part II: Treatment of CCP equity in resolution
- We welcome the focus of the consultation paper on ways to expose CCP equity in resolution.
- Equity should be fully loss bearing in line with corporate finance principles
- The NCWO counterfactual should be clarified
- Participants should be compensated for the use of recovery and resolution tools
- Clear distinction between recovery and resolution
- Resolution tools should not make the crisis worse
- Resources to cover losses should be different from those set aside for recapitalization
- Incentives need to be aligned
- CCPs should have more SITG in two tranches
The Associations will continue to work with the FSB as they develop their recommendations.
Documents (1) for ISDA, FIA and IIF Respond to FSB’s Consultation on CCP Resources in Resolution
Latest
Response on Commodity Derivatives Markets
On April 22, ISDA and FIA submitted a joint response to the European Commission’s (EC) consultation on the functioning of commodity derivatives markets and certain aspects relating to spot energy markets. In addition to questions on position management, reporting and...
Episode 50: The Value of Derivatives
A new report from ISDA shows that companies all over the world use derivatives to alleviate uncertainty, transfer risk and enhance profitability. ISDA discusses the findings with Boston Consulting Group’s Roy Choudhury. Please view this page via Chrome to access...
ISDA/IIF Response to EC Market Risk Consultation
On February 22, ISDA and the Institute of International Finance (IIF) submitted a joint response to the European Commission’s (EC) consultation on the application of the market risk prudential framework. The associations believe the capital framework should be risk-appropriate and...
ISDA Submits Letter on Environmental Credits
On April 15, ISDA submitted a response to the Financial Accounting Standards Board’s (FASB) consultation on environmental credits and environmental credit obligations. The response supports the FASB’s overall proposals to establish clear and consistent accounting guidance for environmental credits, but...