On 5 July 2022, the European Securities and Markets Authority (ESMA) published the results of its fourth stress test exercise of central counterparties (CCPs).
The results confirm the overall resilience of EU CCPs, as well as third-country tier 2 CCPs, to credit, concentration and operational risks under the tested scenarios and implemented framework. However, the stress test also identified areas where some CCPs may need to strengthen their risk management frameworks, or where further supervisory work should be prioritised, including on concentration and operational risks.
The report’s key findings include:
- CCPs have sufficient buffers to withstand adverse market developments in combination with the default of the two clearing members with the largest exposures.
- Gaps have been identified between the necessary and available buffers for concentration risks for some CCPs, particularly in commodity derivatives markets.
- CCPs remained overall resilient despite increased market volatility in the wake of Russia’s invasion of Ukraine.
- For operational risk, differences in terms of risk sources, exposures and mitigation tools across CCPs are observed and need to be further assessed on an individual basis before issuing potential recommendations.
- Most of the analysed operational events stem from third-party services, whereas a number of critical third-party service providers have the potential to affect the critical functions of multiple CCPs in a correlated manner.
Going forward, in line with the mandate provided under the European Markets Infrastructure Regulation, where the assessments expose shortcomings in the resilience of one or more CCPs, the ESMA will issue the necessary recommendations.