European lawmakers urged to prevent CCP contagion risk

Watchdog says carve-out needed in new recovery and resolution rules to avoid cascading default of clearing houses

Rules to resolve ailing central counterparties must change to ensure tools used by a CCP to allocate losses don’t force another over the cliff, Europe’s watchdog for systemic risk has warned.

“Having legal certainty in dealing with interoperable CCPs is crucial,” says Giuseppe Insalaco, a principal financial stability expert at the European Systemic Risk Board. “Resolution authorities [must be able] to do their jobs quickly and without being afraid to act because they don’t know if there are