Europe’s securities watchdog will conduct the first EU-wide stress tests for clearing houses.
The European Securities and Markets Authority (ESMA) is mandated to conduct the stress tests under the EMIR regulation to identify any possibly flaws in the market infrastructure system.
With activity dramatically increasing in clearing houses as part of the G20 post-crisis reforms, concerns over the safety and resiliency of central counterparties (CCPs) have been raised.
“It is essential to test the sufficiency of their resources, not only individually but also at an EU-wide level. These stress tests are a crucial supervisory tool to ensure the sector is safe and resilient to shocks,” said Steven Maijoor, chair, ESMA.
Alongside national regulators, the stress-tests will involve European CCPs being exposed to adverse market scenarios, focusing on the counterparty credit risk that CCPs would face as a result of multiple clearing member defaults and market price shocks.
ESMA will publish the results of the stress test on 29 April.