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Bank of England finds some vulnerabilities in probe of central counterparties


Published on 2024-11-29 04:00:38 - Bill Williamson, WOPRAI
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  • The Bank of England said on Friday that a stress test of central counterparties (CCPs)- businesses that form a key part of the plumbing of financial markets - did find some vulnerabilities but overall showed resilience.

The Bank of England has identified certain vulnerabilities in its review of central counterparties (CCPs), which are critical financial market infrastructures that manage the risk of default by clearing and settling trades between parties. The review, part of a broader stress test, found that while CCPs are generally resilient, there are areas where improvements are necessary to enhance their stability and risk management practices. The vulnerabilities include issues related to margin practices, the management of liquidity risks, and the potential for procyclicality in margin calls. The Bank of England emphasized the importance of CCPs in maintaining financial stability and announced plans to work with these entities to address the identified weaknesses, ensuring they can withstand severe but plausible market stress scenarios.

Read the Full Reuters Article at [ https://www.reuters.com/business/finance/bank-england-finds-some-vulnerabilities-probe-central-counterparties-2024-11-29/ ]