EUROPEAN UNION: ESMA Announces Details of 2017 CCP Stress Test

Thursday February 2 2017

The European Securities and Markets Authority (ESMA) has published the framework for its 2017 pan-EU stress test exercise on central counterparties (CCPs). The exercise covers 17 EU CCPs including all products currently cleared by these CCPs and will assess the resilience and safety of the EU’s CCPs from a systemic risk viewpoint.

The results of the exercise will provide supervisors, CCPs and other market participants with useful information on the resilience of the EU’s CCPs 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.

ESMA’s stress test will complement the stress tests CCPs already run on a daily basis. As CCPs’ stress tests focus on their own environment, such as their participants, cleared products and business activity, the ESMA stress test will look at the entire system of EU CCPs by considering possible spill-over effects resulting from CCPs’ interconnectedness. CCPs’ resilience will be assessed against a combination of multiple participant defaults and simultaneous market price shocks.

Click here for Methodological Framework

Click on the link above for further details.