Europe leaves IM haircutting in CCP recovery crosshairs

No explicit ban in parliamentary text; banks say method could spark exodus from stricken CCPs

Central question: should CCPs be allowed to apply haircuts on clearing members' IM contributions?

Proposals from the European Parliament could leave central counterparties with the power to dip into the initial margin accounts of clearing members during a crisis. Members of CCPs say it could lead to a rush for the exits following signs of impending failure and scupper the chances of a recovery or orderly resolution.

On January 24, the European Parliament agreed a final compromise text outlining the procedures for a CCP in crisis, known as the CCP recovery and resolution regulation. Central