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Financial Markets

Question for Treasury

UIN HL2584, tabled on 13 March 2020

To ask Her Majesty's Government whether the recent equity market falls have surpassed stress test levels used to determine the capital adequacy of central clearing houses supervised by the Financial Conduct Authority.

Answered on

26 March 2020

Central clearing houses, or central counterparties (CCPs), are financial institutions firms use to manage some of the risks arising from traded markets. UK CCPs are subject to many requirements to manage financial risk, including maintaining risk models to quantify the level of financial resources they need to operate safely. As such, it is right that the level of resource held by CCPs is subject to rigorous and frequent internal stress tests, as set out in the legislation that governs them. These stress tests assess the resilience of a CCP in extreme but plausible market conditions. Furthermore, UK CCPs remain subject to EU-wide stress tests during the Transition Period.

The Bank of England supervises UK CCPs as part of its financial stability objective. However, it is not possible to publicly disclose specific quantitative details on individual firm’s stress tests because this is firm sensitive information.

Answered by

Treasury