- The ESMA has conducted its fifth stress test for Central Counterparties (CCPs) to assess their resilience under adverse market conditions. The test covers EU and Tier 2 CCPs, focusing on credit, concentration, liquidity and climate risks. The stress test confirms the resilience of EU and Tier 2 CCPs under severe market conditions, though improvements are needed in managing concentration and climate risks.
- Credit Stress Test: Evaluates CCPs' ability to cover losses from significant market shocks and clearing member defaults; Most CCPs maintained sufficient resources, indicating overall system resilience.
- Concentration Risk: Assesses the impact of liquidating large, concentrated positions; Identifies gaps in managing commodity derivatives, with varying adequacy of risk models across CCPs.
- Liquidity Stress Test: Tests CCPs' liquidity under stressed conditions and the default of major clearing members; CCPs generally maintained positive liquidity balances, though some needed access to foreign exchange markets for less common currencies.
- Climate Risk: Exploratory analysis of CCPs' exposure to climate-related risks, particularly for commodity and energy contracts; CCPs are starting to integrate climate risks into their stress testing, but more data and improved monitoring are needed.
- Ecosystem Analysis: Examines the broader clearing ecosystem, including the resources and behaviors of CCPs, clearing members and their clients; Highlights significant increases in required margins and default fund contributions due to recent market volatility.
