Cognisant of their relevance for financial stability, CCPs continuously work to ensure their risk management frameworks are robust and up-to-date. In particular, CCPs implement and maintain dedicated model risk frameworks to govern the life-cycle of the models and methodologies used to assess risk. The EMIR 2.2 legislation includes important alterations to the way CCPs manage their models and parameters are introduced under EMIR Article 49. These changes will be defined in regulatory technical standards for which we suggest that:
- The proportionality of the new requirements be considered - If thresholds for model changes become too tight, implying that any change is deemed significant, the incentives for CCPs to enhance the robustness of their risk systems is reduced. Similarly, additional and detrimental regulatory arbitrages could be introduced when compared with CCPs in other jurisdictions, where changes than in the EU can take up to a year may be implemented in days).
- Guidance be developed to instruct CCPs how the validation process will be implemented - This includes guidance, for instance, on timelines, required documentation and testing, success criteria, approval process, and remediation actions. The current reduced clarity on requirements for the application pack can lead to multiple re-submissions and limited transparency towards clearing members and other stakeholders.
EACH believes that suggestions in our note would improve the ability of CCPs to manage risk in a more effective manner while being subject to the adequate supervisory scrutiny.
For more information, please find attached the EACH note or visit our website www.eachccp.eu