##ps are designed to be shock absorbers at the centre of the financial system, damage to a ccp presents risks to the system as a whole. in order to ensure that what has been designed as a shock absorber does not under stress become a shock transmitter, ccps not only hold collateral from their members, they are required to hold additional default funds large enough to cover the default of their two largest members. this default fund includes the ccps own capital. and they are able to call for further resources from their members under their recovery plans if these funds are exhausted. notwithstanding the high level of resilience that has been achieved in this area, i think there are three important ‘ prudential risk ’ challenges for ccps going forward. the first is to ensure that ccps are prudent and require enough collateral, or ‘ margin ’, from their counterparties in good times to ensure they are protected in times of stress against movement in financial asset prices and in counterparty credit worthiness. ccps use mathematical models to calculate, on the basis of past and potential market moves, the size of the risks they need to insure against. posting margin to a ccp is a cost for a ccp counterparty and its clients. ccps need strong internal systems and controls to ensure that over time, commercial pressures and competition from other ccps do not lead to inadequate margining. it is crucial to ensure that the models that drive ccps margin requirements are robust, conservative and do not act pro - cyclically. this is an area that, as a supervisor, we look at closely. the second is to develop further the arrangements for the recovery and, if necessary, resolution of ccps. i will cover this in the next section. emir rts article 45. 2 requires ccps to secure not less than 95 % of cash collateral with highly liquid financial instruments, thereby limiting the amount of cash ccps can hold unsecured. all speeches are available online at www. bankofengland. co. uk / speeches and the third, and perhaps most important, is to develop within ccps the culture of the ‘ systemic risk manager ’ - responsible not just for managing the risks to the firm but also managing the risks to the system more broadly. ccp management, with encouragement from supervisors and regulators, have made significant progress in strengthening their governance and risk culture. but as the reforms are implemented, as greater use is made of ccps, as they become more

a more stable world public policy must still determine the best use of tools – for instance, advocating ever tougher stress tests and larger liquidity buffers in an attempt to cover future black swans is not obviously preferable to having tools by which central banks can make temporary and targeted interventions, as we did last october. this underlines my earlier point that strong institutions of prudential policy ( macro and micro ) are important to enable these decisions to be made. let me end with the short version of the main points : 1 : i don't believe we face a systemic banking crisis ; 2 : we must ensure that financial stability continues to mean that monetary policy takes into account financial conditions but does not have to aim off for instability ; 3 : this requires robust structures for financial stability policymaking ; 5 / 6 bis - central bankers'speeches 4 : central bank balance sheets will remain larger than pre - crisis for financial stability reasons ; 5 : we don't know yet where central bank balance sheet reduction will need to stop in terms of the necessary level of reserves ; 6 : this will in part depend on the desired future size and make - up of banks'liquidity buffers ; 7 : stable coins will need to have the characteristics of, and be regulated as, inside money ; 8 : the key question on retail digital money is can we envisage a demand for it, but we should guard against failure of imagination ; and be able to accommodate it within the regulatory framework ; 9 : if retail digital money is part of the future, it would be better not to disturb the need to have both inside and outside money – so we cannot rule out a need for cbdc ; 10 : we will need to revisit the protection of inside money in the form of deposits, especially in smaller banks ; 11 : stress testing the financial system is crucial, but stress tests will not always deal with black swans – that's why resolution and other policy intervention tools must be in place ; 12 : non - bank financial intermediation is a very large and heterogeneous landscape – it presents surveillance challenges of both breadth and depth ; 13 : nbfi leverage and inter - connectivity can be hard to map ; 14 : nbfi issues are often inherently cross - border in nature. the role of the fsb is important ; 15 : macro and micro - prudential policies need also to support lending to and investment in the economy ; good luck with the roundtable today. thank you