Brown Bag Seminar: Angela Armakola

Monitoring CCP Resilience Using Public Data

Angela Armakola (Université Paris 1 Panthéon-Sorbonne and Labex ReFi)

Ms. Armakola will give a review of her work on CCPs based on two articles:

 “CCP resilience and clearing membership “ with Jean-Paul Laurent

Abstract: We consider pre-funded waterfall resources, recovery tools and assessment powers of major European and US central clearing counterparties to assess the possible exposure of clearing members. We also investigate loss allocation rules at the end of the waterfall and the impact of emerging resolution regimes on contingent liquidity. As the resilience of a central clearing counterparty depends on the soundness of the member base, we assess the payment capacity of a member base under normal and stressed scenarios. We show that under a cover 2 stressed scenario, member base quality dramatically erodes, jeopardising the ability of clearing members to provide contingent liquidity and to sustain the central clearing counterparty's resilience. We also discuss various conflicts of interest that can occur depending on the average quality and heterogeneity of member bases.

 “The European CCP ecosystem” with Benedetta Bianchi

This article investigates the European CCP landscape using publicly available information. It provides an analysis of risks associated to CCPs, especially focusing on liquidity risk. The paper proposes measures to monitor CCPs, based on data provided under the Public quantitative disclosure standards for central clearing counterparties and other publicly available data. The European CCP ecosystem is explored in terms of markets served, size and composition of default waterfalls, size and degree of interconnectedness of CCP member bases. Furthermore, the paper investigates liquidity issues CCPs might be facing; it proposes a set of measures to monitor the identified sources of liquidity risk.