##co established a joint study box 2 fsb draft guidance on ccp resolution key elements underlined in the draft guidance include the following : • ccp resolution should pursue the objective of financial stability, ensure the continuity of critical functions and avoid exposing taxpayers to losses in all jurisdictions where those functions are critical. it should also maintain appropriate incentives for effective default management and recovery. • resolution should to the extent possible, be predictable and ensure that no creditors are “ worse off ” in resolution than they would have been under ccp insolvency proceedings. resolution authorities should therefore follow the steps under the ccp recovery plan unless a departure is deemed necessary to achieve the resolution objectives and safeguard financial stability. resolution authorities should also have the power to award compensation to clearing members contributing resources in excess of their obligations under ccp rules in the form of equity or other types of ownership. • in defining the timing of entry into resolution, there is a need to balance predictability for stakeholders with flexibility for resolution authorities. to this end, the draft guidance sets out potential indicators for default and non ‑ default - related losses that may inform the decision on whether to place the ccp in resolution. in addition, relevant authorities should cooperate closely in the lead - up to resolution. • resolution authorities should pursue prudent and consistent approaches when assessing ccps ’ resolution funding. to this end, the draft guidance sets out some common minimum criteria that should be considered. temporary public funding should only be used as a last resort and coupled with very robust ex post recovery mechanisms. • when conducting resolution planning, authorities should carefully differentiate between potential default and / or non - default resolution scenarios and related arrangements for allocating financial losses and replenishing ccps ’ financial resources. • oversight, supervisory or resolution authorities should be able to address material impediments to resolvability that may be identified by the resolution authority. • to assist in the establishment of crisis management groups for ccps that are systemically important in more than one jurisdiction, further guidance is provided on identifying the relevant ccps and the composition of these groups. banque de france financial stability review no. 21 - april 2017 - the impact of financial reforms central clearing : reaping the benefits, controlling the risks benoit cœure group in july 2015 to identify, quantify and analyse interdependencies between ccps and clearing members and any resulting systemic interdependencies. as a first step, the study group collected data from around 25

clients ’ cleared derivatives transactions under the basel iii leverage ratio framework, which provides that clearing members are not able to offset the initial margin posted by their clients against their potential future exposure to that client. this treatment could weaken the business case for providing client clearing services, thereby limiting the scope for indirect access to ccps and ultimately reducing hedging opportunities for end users. it could also give rise to disincentives for using ccps and increased recourse to bilateral clearing, which would be associated with greater systemic risk, including for banks. in addition, the prospective further concentration of client clearing business in a smaller number of clearing members would further increase the respective financial risk concentration and could limit the ability to port client positions and collateral in case of member default, heightening potential systemic spill - over risks. the consequences of the basel iii framework for the incentives to clear otc derivatives and other products centrally therefore need to be carefully monitored. similar problems could be associated with the potential inclusion of banks ’ exposures to ccps under the large exposure framework. the large exposure regime, which applies quantitative limits to banks ’ exposures to individual counterparties, is in principle difficult to reconcile with the nature of the ccp industry. even high hard limits may not be workable for products where only one ccp provides relevant services, and could conflict directly with mandatory central clearing obligations. banks could also be forced to move to a greater extent into bilateral clearing, which would also be undesirable in view of the recognised greater safety of central clearing. such cross - sectoral frictions should be addressed in a manner that appropriately balances the prudential objectives of banking supervisors, the concerns of ccp supervisors and overseers, and the shared interest in an overall safe and efficient clearing landscape. the fsb as coordinator of the ccp work plan could play an important role in this regard, notably by supporting joint ex ante and ex post impact assessments of prudential changes by the affected standard - setting bodies. in this context, it would be important to also consider possible qualitative changes in market structures that could give rise to new systemic vulnerabilities and that may be difficult to subsequently control or reverse. 2 | 3 making ccp supervision and oversight more granular increased central clearing and improved safeguards for ccps contribute not only to the safety but also to the efficiency of the financial system, given the benefits of central clearing in terms of greater collateral efficiency and market transparency. however, more