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16 Financial Market Infrastructures in Stress Scenarios

Chryssa Papathanassiou

From: Bank Resolution: The European Regime

Edited By: Jens-Hinrich Binder, Dalvinder Singh

From: Oxford Legal Research Library (http://olrl.ouplaw.com). (c) Oxford University Press, 2015. All Rights Reserved.date: 30 September 2020

Subject(s):
Deposit insurance schemes — Deposit protection schemes — Recovery and Resolution Plan (RRP) — Special Resolution Regime (SSR) — Regulation of banks — European Banking Authority (EBA)

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.

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