FIA and ISDA have submitted a joint response to the Reserve Bank of Australia regarding its draft guidance for the resolution regime of clearing and settlement facilities. The guidance outlines when and how the RBA might deploy its resolution powers, including mechanisms like directing a facility’s actions, appointing statutory managers and transferring critical functions.
The associations welcome this framework as a meaningful step towards providing clarity and confidence to market participants and note areas where further details could enhance effectiveness and predictability.
Key recommendations include:
- Defining which stakeholders the RBA will communicate with, especially clearing members, when entering and proceeding through resolution;
- Enhancing transparency around tools like variation margin haircutting and cash calls by addressing their financial stability impacts;
- Clarifying how compensation for affected participants would be handled under the “no creditor worse off” principle;
- Distinguishing responses between default and non-default loss scenarios to avoid unintended consequences.
By encouraging more explicit details on communication, tool usage and safeguard mechanisms, FIA and ISDA aim to ensure the RBA’s guidance provides both flexibility and market stability during critical interventions.
Read the response in full.
