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On 13 October 2022, the Bank of England (the Bank) published the results of its first public supervisory stress test of UK central counterparties (CCPs). The exercise took place over 2021-22 with the clearing services of all UK CCPs, ICE Clear Europe Limited, LCH Limited, and LME Clear Limited, in scope.
The exercise assessed the credit and liquidity resilience of these CCPs under a severe market stress scenario and the simultaneous default of selected clearing member groups. It was exploratory in nature, aiming to identify potential vulnerabilities or gaps in resilience, rather than testing against a pass-fail threshold.
The findings showed that the UK CCPs were resilient to the market stress scenario and the simultaneous default of the two clearing member groups who, in defaulting, create the largest losses or most negative liquidity balances. Whilst results varied across CCPs, no CCP experienced full depletion of prefunded financial resources or negative liquidity balance.
The findings will be used in conjunction with feedback to the Bank’s Discussion Paper on CCP supervisory stress-testing to help further develop and refine the CCP supervisory stress-testing regime.
The Bank intends to publish a final document for CCP supervisory stress-testing during 2023.
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