TCH’s New Framework For Regulators

The Clearing House (TCH) and the International Swaps and Derivative Association (ISDA) said on Wednesday (May 25) that they have jointly issued a whitepaper that helps guide regulators as they hammer out a new framework for central counterparties (CCP).

The financial system has become increasingly global and always-on, and as a result, there is a growing need for standardization, with 70 percent of swaps being cleared across central platforms. The risk of that preponderance of swaps is tied then to the central locations through which they are cleared. The whitepaper comes as the Financial Stability Board (FSB) announced public comment on the process.

In a statement that accompanied the announcement, ISDA Chief Executive Scott O’Malia stated: “The primary focus of regulators and market participants should be on CCP resilience and developing robust CCP recovery frameworks. Nonetheless, we can’t ignore the issue of CCP resolution and the impact the collapse of a CCP would have on financial stability. It’s, therefore, important this issue is considered in depth.”

In the whitepaper, titled “Considerations for CCP Resolution,” according to the joint entities behind the paper, resolution tools are identified. The dialogue between stakeholders also helps bring to the table key considerations that are deserving of acknowledgement and discussion in framework development. The overall discussion, said the parties, “attempts to both highlight and endorse the thoughtful guidance that has been codified in the FSB’s Key Attributes of Effective Resolution Regimes for Financial Institutions.”

The Clearing House is the banking association and payments company owned by a consortium of the largest commercial banks, dating back to 1853, with a focus on payments infrastructure in the United States.