A discussion paper on central counterparty practices to address non-default losses

This discussion paper, published by the Bank for International Settlements' Committee on Payments and Market Infrastructures (CPMI) and the International Organization of Securities Commissions (IOSCO), seeks industry input on central counterparty (CCP) practices to address non-default losses (NDLs).

Non-default events, such as cyber attacks, can threaten a CCP's viability as a going concern and its ability to continue providing critical services. Therefore, according to the Principles for financial market infrastructures (PFMI), CCPs must take action and have policies, procedures and plans for addressing NDLs, in addition to a sound risk management framework to mitigate and manage those risks. 

The discussion paper seeks to advance industry efforts and foster dialogue on the key concepts and processes used by CCPs to manage potential losses arising from NDLs. It outlines current practices at various CCPs to address NDLs in business as usual (BAU), recovery and orderly wind-down scenarios.

The discussion paper is not intended to create additional standards for CCPs beyond those set out in the PFMI. Nor is it intended to be an assessment of whether CCPs have appropriately implemented the standards set out in the PFMI regarding NDLs.

Published with this report is a cover note listing some of the specific issues on which the CPMI and IOSCO are soliciting input from industry and the broader public (see the press release for more). The purpose of the paper is to elicit comments and feedback from a broad range of interested stakeholders.