Fear of something worse seen as key to CCP recovery
Forcing banks to pick up defaulted trades is “viable option”, says Fed researcher
Bank members of a central counterparty (CCP) must fear the arrival of a resolution authority if future attempts to rescue a failing venue are to succeed, a panel of industry experts has argued. That might mean giving the authorities a bigger stick to wield, such as forced allocation – the controversial ability to compel surviving banks to pick up a defaulted firm’s positions.
“We need to think a little bit further about what the resolution authority should do when it comes in,” said Fredrik
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