BoE researchers flag potential flaws in CCP default funds
Paper asks whether ‘cover two’ standard for central counterparties is tough enough to prevent ‘disaster’; some distributions of risk give cause for concern
Research published on October 24 by the Bank of England (BoE) tests the defences of central counterparties (CCPs), finding they are robust but not impenetrable.
The financial stability paper asks whether the ‘cover two' standard for CCPs is enough to ensure their safety – finding it to be a "prudent" framework, but with some weaknesses.
Cover two states that systemically important CCPs must have sufficient resources to survive the failure of their two largest members, under "extreme but
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