calls, partial tear - up or variation margin gains haircutting. such an assessment is critical in enabling a resolution authority to develop a credible ccp resolution strategy and in informing its decision on whether or not to place a ccp in resolution. a specific challenge in this context is the lack of granular data on central clearing interdependencies due to the strict confidentiality of data on the exposures of individual participants. while cross - ccp supervisory stress testing has proven helpful in gauging the systemic contagion risks arising from central clearing interdependencies, we have only seen a few such coordinated efforts so far. similarly, crisis simulation exercises to test the operational preparedness of authorities for potential stress events have been very limited. more also needs to be done to conceptualise non - default loss scenarios, reliable tools for absorbing the associated losses, and the roles and responsibilities of the various stakeholders. there are far fewer prefunded resources available for non - default losses than for default losses, so the risk of entering into ccp recovery or resolution for non - default related reasons may be higher than for default - related reasons. it is therefore critical to make progress in this area. in this context, we also need to reflect on how to ensure a fair loss allocation. while our choice can be guided by the basic premise that those taking the decisions should also be responsible for any losses, it is not always clear where we should draw this line. for example, the general principle that operational losses should be borne by ccps may not hold in the case of contagion risks emanating from a clearing member that has suffered a cyberattack. in addition, given the small amount of ccp capital, it is uncertain whether comprehensive loss absorption could be ensured in all circumstances. recourse to insurance or voluntary capital injections from parent companies may not be sufficient to ensure a reliable, timely and comprehensive response. in the area of client clearing, we currently see very diverse arrangements for sharing information and involving ccps in the relationships between clearing members and clients. this may result in uncertainties regarding ccps ’ ability to port client positions of a defaulting member in a timely manner, particularly as some clients hold very large directional positions. given the growth of client clearing and the increased degree of client clearing concentration in a few major clearing members, this may expose the financial system to unacceptable risks. joining forces to enhance coordination on risks in central clearing in order to address the problems i

such a horizontal forum could also work towards cross - fertilising approaches to developing stress scenarios that go beyond extreme but plausible events. finally, i also think that regulatory action might be helpful in a few targeted areas. for instance, this may be the case for non - default losses in central clearing, a topic on which current guidance is limited. indeed, work on this is already underway at both cpmi - iosco and fsb level. we should also assess whether we may need more risk - sensitive approaches to the calibration of ccp capital to ensure comprehensive loss absorption. client clearing may be another area requiring more consistent and transparent approaches, depending also on the findings of the ongoing work by the cpmi and iosco in this area. regulatory action should also be considered to address the diverging interests around the allocation of losses in ccp recovery and resolution. given the high concentration of systemic risk in ccps, a credible and effective framework and full stakeholder commitment are absolutely essential. in this context, i see the following guiding principles. first, we must avoid leaving any private sector funding gaps, as they would result in unacceptable risks for taxpayers. ccps must have arrangements in place to ensure comprehensive loss absorption in all circumstances, in line with the cpmi - iosco principles for financial market infrastructures and the related recovery guidance. second, we should acknowledge competitive pressures and diverging interests in central clearing. it is true that the growth of global otc derivatives clearing has led to intensified oligopolistic competition among ccps. considering also that ccps rely on fees in relation to volumes as their sole source of income, and bearing in mind the present low interest rate environment, it cannot be ruled out that some ccps may search for higher yields through more risky investment practices, lower - cost risk management practices or insufficiently prudent “ fit for clearing ” checks. in a world of mandatory central clearing and an oligopolistic market structure, clearing participants may not necessarily be on an equal footing with ccps when negotiating terms for participation and market discipline may not be optimal. third, ccp participants must continue to bear the bulk of default - related losses. we may well consider increasing skin in the game requirements for ccps in the context of default loss absorption in order to strengthen incentives for prudent risk management, but we cannot turn the central clearing model upside down. the fact remains that the transactions brought to central clearing are initiated by clearing members. against this background