On 4 August 2022, the Committee on Payments and Market Infrastructures (CPMI) and the International Organization of Securities Commissions (IOSCO) published a discussion paper on central counterparty (CCP) practices to address non default-losses (NDLs).

Non default events can threaten a CCP’s viability as a going concern and its ability to continue providing critical services. Therefore, according to the Principles for Financial Market Infrastructures (PFMI), CCPs must take action and have policies, procedures and plans for addressing NDLs, in addition to a sound risk management framework to mitigate and manage those risks.

The severity of NDLs can be wide ranging from small losses that arise from minor day-to-day incidents,  larger losses for more serious but less frequent events and significant losses from catastrophic events that could threaten the CCP’s ability to continue providing critical services and potentially its viability as a going concern.

While NDLs are addressed in the PFMI and the CPMI- IOSCO’s revised report on recovery of financial markets infrastructures, there is limited common understanding of CCPs’ current practices to address NDLs.

Purpose of discussion paper

Therefore, the purpose of the discussion paper is intended to facilitate the sharing of existing practices to advance industry efforts and foster dialogue on CCPs management of potential losses arising from non-default events i.e. NDLs, in particular in the context of recovery or orderly wind-down.


The discussion paper:

  • Discusses the underlying analysis conducted by CCPs to develop their plans to address NDLs. The starting point of the analysis is to identify NDL scenarios in a manner consistent with PFMI Principle 3 (framework for the comprehensive management of risks). The discussion paper also considers a range of practices in planning for a wind-down as a result of NDLs if the recovery plan proves, in particular circumstances, to be ineffective.
  • Addresses practices to promote the operational effectiveness of a CCP’s plans to address NDLs, i.e. taking steps to assess, and to increase, the likelihood that the intended results of the CCP’s approach are achieved. It also surveys the information technology systems and processes that are available to support CCPs’ efforts to address NDLs should they arise.
  • Considers the review and testing of plans to address NDLs. This includes internal reviews of plans to address NDLs, the use of crisis management exercises to test plans (both at the CCP-specific level and participation in industry-led multiple CCP exercises), and the inclusion of internal governance structures and participants (and other relevant third parties) in such exercises. The discussion paper also addresses how the results of such reviews and exercises can be used to improve plans to address NDLs and to inform the design and conduct of future exercises.
  • Discusses effective governance, transparency and engagement with participants and authorities. The discussion on governance addresses senior management reviews and who should be responsible for taking decisions regarding the use of tools for addressing specific NDL scenarios.

Next steps

The deadline for responding to the discussion paper is 4 October 2022.