Industry confronts hard choices in CCP recovery debate

The topic of recovery and resolution planning has come to the boil in recent weeks, with widespread calls for CCP operators to contribute more of their own capital. But a range of possible recovery options is available, and there is still little consensus on the right approach. Tom Osborn reports

It is often said that learning to recover from mistakes is more important than trying not to make any at all, but critics of swap market clearing houses claim the sector has got it the wrong way round – investing heavily in the infrastructure required to clear swaps, while the resources and practices that would set them back on their feet after a heavy loss remain scarily inadequate.

At the core of the issue is how CCPs would recover from the default of one or more of their clearing members