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IB head raises CCP capital fears 

April 10, 2014
Christopher Whittall, IFR

Regulators should review the business model of clearing houses that handle over-the-counter derivatives to ensure they can withstand future crises, a senior investment banker said today.

Speaking at the ISDA Annual General Meeting in Munich, Jean Pierre Mustier – head of corporate and investment banking at UniCredit – said the G20 goal of shifting OTC derivatives into central counterparties to reduce systemic risk made a lot of sense.

He suggested, however, implementing this mandate in practice could create more risk in future periods of market stress, emphasising the relative levels of capitalisation of the European banking system (at around €1.6trn) and Europe’s two main CCPs, LCH.Clearnet and Eurex, which hold a mere €1.2bn of capital.

“We’re talking about moving from the interdependence of banks with €1.6trn of capital towards concentrating all of the derivatives exposure in CCPs that have €1.2bn of capital. When I look at it this way, I am not impressed,” said Mustier.

Read more: IFR

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