12.17.18
Regulators Need Joined Up Thinking to Spot Derivatives Risks: BIS
by: Huw Jones
Global regulators should scrutinise clearing houses and banks together to spot financial stability threats from the world's derivatives market, the Bank for International Settlements (BIS) said in its latest quarterly review. Banks and clearing houses are now regularly “stress tested” on an individual or sector-wide basis to check their resilience to defaults and extreme market stresses, but the BIS paper called for checks to be coordinated. Clearing has cut risk in the financial system overall, but banks and clearing houses, also known as central counterparties (CCPs), could create a “destabilizing feedback loop” that amplifies stresses in markets, said the BIS. “Hence, the risks of banks and CCPs should be considered jointly, rather than in isolation.”
Read the full article on Reuters