not resolved, thereby tipping it into insolvency ( whether cash - flow, balance - sheet or both ) if it was not there already. that insolvency counterfactual requires an ex post assessment of the value of assets and liabilities of the firm. that is no easy task but one that can, and has been, credibly undertaken. for ccps the task of assessing an insolvency counterfactual is likely to be harder still – particularly if it must rely upon a forecast of how the rest of the waterfall would have unfolded, the behaviour of the ccp ’ s participants and the movements of the markets in the days that would have followed if resolution had not taken place. a liquidation counterfactual must also confront the argument that the ccp would have protected itself from insolvency through full tear - up. given these valuation challenges, i suspect there will need to be careful further consideration given to the formulation and practical application of the ncwo safeguard ; we must end up with a safeguard that is sufficiently certain and capable of estimation in advance that both creditors and resolution authorities are able to make sensible decisions before, during and after resolution. with that, let me conclude by summing up some key points : • ccp resolution is both a necessary and inevitable part of the overall post - crisis reform agenda to end too big to fail. as private, profit - making enterprises ccps must be allowed to fail, but, given their systemic importance, many will need to be allowed to do so in a manner that maintains the continuity of their critical functions. • having a credible resolution regime for clearing members is a big step forward in helping to reduce the risk of clearing member default and from that the risk of ccp failure. • but reliance on successful resolution of members does not negate the need for ccp resolution arrangements to be capable of responding to both default and non - default losses emerging from both systemic and idiosyncratic shocks. • in thinking about the underlying objectives and needs of a ccp resolution regime, there are many similarities to bank resolution and these should not be forgotten, but clearly there are many differences too and we need to recognise that. see section 5 of the key attributes on safeguards. bis central bankers ’ speeches • effective resolution requires the ability to act promptly and before the point at which the chance of stabilising the ccp is lost. the resolution authority must have a variety of tools at its disposal to

become ever more important since the crisis. this will continue as mandatory central clearing is introduced around the world. addressing the systemic risks associated with over - the - counter ( otc ) derivatives markets is one of the reasons why g20 leaders introduced mandatory central clearing. people tell us that we have thus created in ccps concentration risk and critical nodes. this is true in part, but we did this on the basis that in ccps risks could be better recognised and identified, better managed and reduced via better netting. nonetheless, as many before me have commented 3 the largest ccps are becoming increasingly systemic and interconnected such that their critical services could not stop suddenly without risk of wider contagion. thus, not only do we have to ensure that the level of supervisory intensity matches the risks, something my http : / / www. financialstabilityboard. org / wp - content / uploads / r _ 111104cc. pdf? page _ moved = 1 http : / / www. financialstabilityboard. org / wp - content / uploads / tlac - press - release. pdf benoit coeure, central counterparty recovery and resolution ( nov 2014 ) ; paul tucker, are clearing houses the new central banks? ( april 2014 ). bis central bankers ’ speeches supervisory colleagues are very focused on, we must also address the issue of what should happen if a ccp were to fail. this is already widely recognised. so too is the need for an international solution to the questions that ccp recovery and resolution presents. the largest ccps are systemically relevant at a global level, important for financial stability in multiple jurisdictions due to the nature of their business and the composition of their members and users. they serve multiple markets, having dozens of clearing members from different countries and clearing products in multiple currencies. a patch - work of approaches to recovery and resolution would risk regulatory arbitrage and competitive distortion and so, whilst the fiscal backstop against the unsuccessful resolution of a ccp is ultimately a national one, it is best that the answer on how to avoid this backstop ever being used is developed at a global level. fortunately, that work is already underway and ccp recovery and resolution forms an important part of the financial stability board ’ s ( fsb ) continuing agenda to end too big to fail ( tbtf ). in october 2014 an annex was added to the key attributes of effective resolution regimes to cover their application to financial market infrastructure