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Bank of England paper says some clearing houses may need more capital 

October 27, 2014
Huw Jones, Reuters

Clearing houses may need bigger capital cushions as more and more trading in financial derivatives comes their way, the Bank of England said in a paper on Friday.

BoE Governor Mark Carney has said that regulators must make sure that clearing houses don't end up becoming the new breed of "too big to fail" financial firms.

Clearers have a default fund and stand between two sides of a trade, ensuring completion even if one side goes bust.

The BoE paper is likely to be studied closely by the industry for regulatory pointers as many of Europe's clearers, such as LCH.Clearnet, ICE Clear Europe, and CME Clearing Europe, operate from London under BoE supervision.

Clearers are set to grow massively as new rules require far more off-exchange financial derivatives transactions to be cleared to improve safety and transparency.

Read more: Reuters

 
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