ISDA publishes CCP recovery principles: ISDA has published a set of principles and recommendations on CCP loss-absorbing capacity and recovery and resolution. ISDA highlights the need for:

  • CCP transparency as to the composition and size of its loss-absorbing resources;
  • regulatory driven stress-test criteria;
  • significant CCP "skin in the game", so that CCP's incentives are aligned with those of clearing members;
  • clearly defined recovery plans that cap any cash calls from clearing members and allocate losses only where rules have been agreed and the losses imposed do not affect the economic viability of clearing members; and
  • partial tear-up of problem contracts rather than forced allocation of contracts where the default management plan has failed and the CCP is trying to re-establish a matched book.

(Source: ISDA Launches Principles on CCP Recovery)