Journal of Financial Market Infrastructures

An effective recovery and resolution regime for central counterparties

Working Party, EACH Policy Committee


Central counterparties (CCPs) performed extremely well during the recent financial crisis. Clearing through CCPs has since been promoted by legislators around theworld as a way to mitigate risk in financial transactions. In order to ensure that CCPs remain safe and sound institutions even during an extreme event, global authorities want to ensure that an adequate recovery and resolution regime is in place that focuses on the provision of the CCPs' critical services in times of utmost stress without having recourse to public funds. To this end, the Bank for International Settlements' Committee on Payments and Market Infrastructures and the International Organization of Securities Commissions (CPMI-IOSCO) and the Financial Stability Board (FSB) have published international guidelines and the European Commission is expected to publish a legislative proposal on this subject shortly. With this paper, the European Association of CCP Clearing Houses (EACH) intends to contribute to this debate by defining the principles for an effective recovery and resolution regime for CCPs in Europe. EACH believes that the objective of such a regime should be the continuity of the CCPs' critical services without having recourse to public funds. This regime should be based on an adequate system of incentives where the CCP's shareholders, the clearing members, their clients and the authorities are involved.

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