On April 10, the International Organization of Securities Commissions (IOSCO), in conjunction with the Bank for International Settlements’ (BIS) Committee on Payments and Market Infrastructures, published a framework for supervisory stress testing of central counterparties (CCPs) in a single jurisdiction or across multiple jurisdictions. The framework’s focus is stated to be the evaluation of “broad, macro-level impacts across multiple CCPs.”

The framework divides the process that authorities would follow in coordinating a multi-CCP supervisory stress test (SST) into six stages:

• purpose and exercise specifications;

• governance arrangements;

• developing stress scenarios;

• data collection and protection;

• aggregating results and developing analytical metrics; and

• use of results and disclosure.

Reports have suggested that the framework may affect the European Union’s proposed amendment of the European Market Infrastructure Regulation in relation to the supervision of CCPs, in particular third-country CCPs (EMIR 2.2).

However, EMIR 2.2 provides only for the assessment of individual CCPs. Under EMIR 2.2, the European Markets and Securities Authority may specify a CCP as “substantially systemic” and require that CCP to establish an EU venue to mitigate, by facilitating supervision, the substantial exposure risk to the European Union and its financial system.

A footnote in the framework adds that its purpose does not preclude the use of the framework, where “suitably adapted . . . for the design of tests with other objectives, including SSTs designed to analyze the individual financial resilience of CCPs”.

An unnamed European Commission official confirmed that the framework would not impact EU plans for the introduction of EMIR 2.2.

The framework is available here.

The BIS press release in relation to the framework is available here.