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ESMA announces details of 2017 CCP stress test

The European Securities and Markets Authority (ESMA) has published today the framework for its 2017 pan-EU stress test exercise on central counterparties (CCPs). The exercise covers 17 EU CCPs including all products currently cleared by these CCPs and will assess the resilience and safety of the EU’s CCPs from a systemic risk viewpoint.

The results of the exercise will provide supervisors, CCPs and other market participants with useful information on the resilience of the EU’s CCPs to different market shocks. The exercise will also help identify any potential shortcomings in the CCPs’ resilience, and if required ESMA will issue recommendations for further action.

ESMA’s stress test will complement the stress tests CCPs already run on a daily basis. As CCPs’ stress tests focus on their own environment, such as their participants, cleared products and business activity, the ESMA stress test will look at the entire system of EU CCPs by considering possible spill-over effects resulting from CCPs’ interconnectedness. CCPs’ resilience will be assessed against a combination of multiple participant defaults and simultaneous market price shocks.

The process for running the 2017 EU-wide CCP stress test involves close cooperation between ESMA, national competent authorities (NCAs), the 17 CCPs and the European Systemic Risk Board (ESRB), which has provided the common market stress scenarios.

Timeline

ESMA has launched the data request and has provided detailed instructions on how CCPs are expected to calculate and report the data. In March 2017, CCPs will have to provide the data for the stress test, which will then be validated by NCAs and ESMA in Q2 2017. ESMA will finalise the data analysis by Q3 with the results of the exercise being published in Q4 2017.