Outsource Clearing House: Clearing houses’ role in reducing counterparty risk demands higher capitalization say big banks.
Outsource Clearing House says that it agrees with assertions at global banks that clearing houses must be made to hold enough capital in reserve to support the position they occupy between counterparties.
In the aftermath of the financial crisis, clearing houses moved to the vanguard of policymakers’ drive to reform the traditionally opaque derivatives markets and, in doing so, reduce the systemic risks posed by the global banks. However, as trading volumes transacted through clearing houses’ systems have jumped exponentially, many banks are expressing concerns about their ability to mobilize sufficient resources in the event of a default.
Outsource Clearing House believes that clearing houses must be able to demonstrate that their systems can withstand issues on both sides of a trade and that the first step in addressing the concerns of their members is moving to ensure the availability of capital rather than relying on taxpayer-funded bailouts.
Geraint Lloyd, chief operating officer at Outsource Clearing House says, “The clearing houses that are opposed to or disputing the need for more reserve capital are playing a very dangerous game. You cannot have a situation where the risk is shifted from the banks to entities who, through their own lack of regulation, harbor risks that are as opaque as the derivatives market was before the crisis.”
“There is a lot of finger-pointing going on and many people are questioning the banks’ motives but, regardless, markets must be insulated against another Lehman Brothers, a re-run of which simply cannot be ruled out especially with all the QE-driven asset price inflation going on,” he concluded.
About Outsource Clearing House
Outsource Clearing House is a Derivatives Clearinghouse. Our offering is focused on providing a reliable
service against transparent and predictable pricing using robust risk management systems.
The company was established as a Chinese Derivatives CCP to serve Multi-disciplined brokerages.
Outsource Clearing House has its registered office in Beijing, People’s Republic of China and is regulated in China by the People’s Bank of China.
Contact Outsource Clearing House:
Fangyuan Building, Floor 29
B56 Zhingguancun, South Street
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http://www.outsourceclearinghouse.com
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