‘Cover 2’ CCP reserve standard inadequate – study

Stress tests underestimate how twin member failure affects clearing house stability

Researchers say “Cover 2” fails to account for the network effects of a twin default

False assumptions about how crises spread mean that default funds in many clearing houses could be insufficient to protect against contagion during periods of extreme stress, new research claims.

Large clearing houses are supposed to hold resources capable of absorbing the simultaneous default of their two largest members. But this standard, known as “Cover 2”, fails to account for the likely impact of a twin default on the network of interbank exposures, weakening other clearing members and

Only users who have a paid subscription or are part of a corporate subscription are able to print or copy content.

To access these options, along with all other subscription benefits, please contact info@risk.net or view our subscription options here: http://subscriptions.risk.net/subscribe

You are currently unable to copy this content. Please contact info@risk.net to find out more.

Sorry, our subscription options are not loading right now

Please try again later. Get in touch with our customer services team if this issue persists.

New to Risk.net? View our subscription options

If you already have an account, please sign in here.


Want to know what’s included in our free membership? Click here

This address will be used to create your account

Counting down to dollar Libor transition

In a Risk.net webinar, experts discussed the impact of market volatility on Libor transition, the availability of term SOFR, developments in non-linear markets and management of forthcoming CCP conversions

You need to sign in to use this feature. If you don’t have a Risk.net account, please register for a trial.

Sign in
You are currently on corporate access.

To use this feature you will need an individual account. If you have one already please sign in.

Sign in.

Alternatively you can request an individual account here