The FIA has submitted its response to the Bank of England's consultation paper on Ensuring the Resilience of Central Counterparties. FIA fully supports the BoE’s objective to strengthen the UK EMIR framework, align with international standards and enhance the financial robustness of CCPs through a proportionate regulatory approach.
FIA makes recommendations in the response, which focus on three core areas to maintain the competitiveness of the UK clearing sector:
1. Default Management and Porting: FIA strongly opposes the use of financial incentives (such as adjusting default fund contributions) to encourage the porting of client positions during a clearing member default. Instead, FIA advocates for non-financial measures, including enhanced transparency and standardised procedures, as the more effective means to ensure successful and smooth porting outcomes.
2. Margin Framework: FIA recommends targeted enhancements to CCP margin models and proposes refinements to Anti-Procyclicality tools, like the 25% buffer, to ensure they are more dynamic and effective to meet their intended objectives.
3. Governance and Costs: FIA advises that CCPs must exercise greater transparency and governance regarding cost pass-through. This is critical to prevent the unfair transmission of implementation costs downstream to clients and Clearing Service Providers, which could ultimately disincentivise crucial clearing activity.
Read the response here.
