ESMA outlines framework for CCP stress test
On Feb. 1 the European Securities and Markets Authority published the framework for its 2017 stress testing exercise for central counterparties. This year's exercise, the second conducted by ESMA, will cover 17 CCPs in the European Union and all products currently cleared by these CCPs. ESMA will collect the data for the stress test from CCPs in March, finalize the data analysis by the third quarter and publish results in the fourth quarter.
The purpose of the exercise is to assess the resilience of clearinghouses to "adverse market developments" by analyzing the impact of various scenarios, ESMA said. This year's exercise will include liquidity risk alongside credit risk in the scenarios. The results of the exercise will provide supervisors, CCPs and other market participants with useful information on the resilience of the clearing system to different market shocks. The exercise will also help identify any potential shortcomings in the CCPs’ resilience, and if required ESMA will issue recommendations for further action.
