The WFE has responded to the CPMI-IOSCO Framework for Supervisory Stress Testing of Central Counterparties (CCPs).
In response to the consultation, the WFE made a number of points:
• There are areas of concern around information sharing and issues of confidentiality, particularly for multi-jurisdictional stress testing; regulators can address these issues through engagement with their counterparts, market infrastructure operators and market participants.
• The WFE cautions against taking a one-size-fits-all stress test approach. As CPMI-IOSCO rightly recognises, not all aspects of a stress test will be relevant depending on the jurisdiction/market structure in which the CCP operates. The WFE considers it preferable to have a small suite of stress tests to reflect the diversity within the CCP ecosystem.
• The WFE believes the value of multi-jurisdictional stress tests sits at the macro-prudential level, and as such, it is encouraged by the focus on macro-prudential stress scenarios and impacts, which should supplement the more targeted stress tests performed by each CCP.
• Authorities should seek the expertise and input of CCPs when designing the stress tests to ensure their relevance and that the scenarios are indeed plausible.
You can read the full response here.