FR08/2018 Implementation monitoring of PFMI: follow-up Level 3 assessment of CCPs’ recovery planning, coverage of financial resources and liquidity stress testing

Committee on Payments and Market Infrastructures Board of the International Organization of Securities Commissions Implementation monitoring of PFMI: follow-up Level 3 assessment of CCPs’ recovery planning, coverage of financial resources and liquidity stress testing May 2018 2 CPMI-IOSCO – Implementation monitoring of PFMI: Level 3 assessment This publication is available on the BIS website (www.bis.org) and the IOSCO website (www.iosco.org). © Bank for International Settlements and International Organization of Securities Commissions 2018. All rights reserved. Brief excerpts may be reproduced or translated provided the source is stated. ISBN 978-92-9259-161-8 (online) CPMI-IOSCO – Implementation monitoring of PFMI: Level 3 assessment 3 Contents Abbreviations ............................................................................................................................................................................. 5 1. Executive summary ................................................................................................................................................ 6 1.1 Scope of the assessment .................................................................................................................. 6 1.2 Key findings of the assessment ...................................................................................................... 7 1.2.1 Recovery planning ............................................................................................................................... 7 1.2.2 Coverage of financial resources ..................................................................................................... 8 1.2.3 Liquidity stress testing ....................................................................................................................... 9 2. Introduction............................................................................................................................................................ 10 2.1 Broader context of the Level 3 assessments ........................................................................... 10 2.2 Objective of L3 assessments ......................................................................................................... 10 2.3 Scope of this review .......................................................................................................................... 11 3. Process and methodology ................................................................................................................................ 13 3.1 Jurisdictional/CCP coverage .......................................................................................................... 13 3.2 Data analysis and review process ................................................................................................ 15 4. Implementation progress and key findings .............................................................................................. 16 4.1 Recovery planning ............................................................................................................................. 16 4.1.1 Progress made .................................................................................................................................... 16 4.1.1.1 Progress made by the CCPs that were part of the initial L3 assessment ........................ 16 4.1.1.2 Changes made by the new CCPs ..................................................................................................... 17 4.1.2 Allocation of potentially uncovered credit losses caused by a participant default . 17 4.1.2.1 Comprehensiveness of CCPs’ rules and procedures to address uncovered credit losses fully ............................................................................................................................................ 18 4.1.3 Re-establishing a matched book following participant default ...................................... 18 4.1.3.1 Use of voluntary and/or mandatory tools to re-establish matched book ...................... 18 4.1.4 Replenishment of financial resources ........................................................................................ 19 4.1.5 Addressing uncovered liquidity shortfalls ............................................................................... 20 4.1.5.1 Use of qualifying liquid resources to address uncovered liquidity shortfalls ................ 20 4.1.5.2 Payment deferral as a tool to address uncovered liquidity shortfalls .............................. 21 4.1.5.3 Other tools to address uncovered liquidity shortfalls ............................................................. 21 4 CPMI-IOSCO – Implementation monitoring of PFMI: Level 3 assessment 4.1.5.4 Replenishment of liquid resources ..............................................................................