Central clearing: safe as houses?

New regulations mandating the central clearing of OTC derivatives bring operational risks for central counterparties and increased exposure to systemic risk. In the second of a two-part series, ORR looks at the problems and opportunities for clearing houses

When Lehman Brothers collapsed in September 2008, it sent shockwaves around the world – but without the efforts of clearing houses, and one in particular, the collapse would have had an even greater impact on the world’s economy. At the time of Lehman’s bankruptcy declaration, London-based LCH.Clearnet inherited $10 trillion of exposure from Lehman, which was active in almost all of LCH.Clearnet’s business segments. Had LCH.Clearnet not had systems in place to mitigate this risk, the results