Part II The New European Supervisory Architecture, 6 A European Framework for Macro-Prudential Oversight »
Chryssa Papathanassiou, Georgios ZagourasFrom: Financial Regulation and Supervision: A post-crisis analysis
Edited By: Eddy Wymeersch, Klaus J Hopt, Guido Ferrarini
6.01 From a supervisory perspective, the main issue raised in the wake of the recent financial crisis was the question as to how the risk accumulating in the financial system and shortcomings with a systemic effect could go undetected for such a long time.1 In 2009 the de Larosière-Report provided an explanation by noting that despite the progress made in financial innovation and integration across borders, the supervisory framework had remained limited by its regional and national focus. This narrow focus solely on the activities of individual firms, as employed...
Part I Introduction, 3 A Systemic Assessment of the Financial Market Infrastructures Landscape: FMI Groups and their Implications »
Chryssa PapathanassiouFrom: Financial Market Infrastructures: Law and Regulation
Edited By: Jens-Hinrich Binder, Paolo Saguato
This chapter assesses the systemic relevance of financial market infrastructure (FMI) groups. It takes a closer look at the different organisational models of FMI groups and the resulting risks, and examines how these risks have been addressed in recent international standards and legislation within the US and the EU. International standard-setting bodies, such as the Committee on Payments and Market Infrastructures (CPMI) in cooperation with the International Organization of Securities Commissions (IOSCO), have long acknowledged the importance of FMIs as being at the 'core' of the global financial system. While a number of large and interconnected financial firms have failed in a spectacular manner during the recent financial crisis, no central counterparty (CCP) or any other systemically important FMI has failed despite the significant stress experienced. Following calls by the G-20 after the financial crisis, trade repositories (TRs) and CCPs have extended their services to the over-the-counter (OTC) derivatives market providing powerful risk mitigation. The chapter then turns to the treatment of FMI operators with a banking licence and their treatment in the European regulatory framework for credit institutions. Risk-sensitivity and proportionality of regulatory requirements are identified as key challenges for the application of bank capital and organisational requirements to providers of FMI.
Chryssa PapathanassiouFrom: Bank Resolution: The European Regime
Edited By: Jens-Hinrich Binder, Dalvinder Singh
This chapter examines the crucial role of Financial Market Infrastructures (FMIs) during a crisis. It addresses the three asymmetries surrounding the rules on FMIs’ defaults and looks at how to improve the legal soundness of crisis prevention and crisis management measures for FMIs. The first asymmetry stems from the fact that different bankruptcy procedures are applied to different systemically important financial market participants, as well as the fact that conflicts of laws arise from the bankruptcy of entities with cross-border operations. The second arises from the expansion of FMI services and relates primarily to two otherwise benign features which central counterparties (CCPs) offer to their members for the products they clear: credit risk mitigation and loss mutualization. The third and final asymmetry stems from the fact that supervisory authorities have been insufficiently attuned to each other’s legitimate interests and have focused resolutely on their own markets.