CPMI-IOSCO has published a consultation on general business risks and losses, with a view to providing supplementary guidance to the PFMI. The proposal expands on arrangements relating non-default losses at CCPs and extends the scope to all FMIs, including CSDs and payment systems. In particular, it focuses on how FMIs should determine the amount of liquid net assets funded by equity (LNAFE) they must hold to absorb losses and ensure recovery or orderly wind down.
Our feedback is as follows:
• The current PFMI framework already functions effectively and additional guidance is not clearly necessary. There is limited evidence that the proposal would deliver meaningful improvements to financial stability.
• The proposal risks creating new capital requirements in practice, even if that is not the stated intention, including through potential double counting of risks or layering of additional capital expectations.
• Resources held to address custody and investment losses should not automatically be excluded from LNAFE where they are already genuinely loss absorbing and structurally robust.
• FMIs should retain flexibility to apply expert judgement when identifying and estimating business risks, rather than being driven toward overly complex modelling or external validation that increases costs without clear resilience benefits.
• Transparency is important, but overly detailed disclosures regarding risk scenarios or methodologies could expose commercially sensitive information.