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Moody’s proposes new CCP ratings 

June 23, 2015

Helen Bartholomew, IFR

Moody’s has proposed a new global methodology that will allow clearing members and end-users to assess and compare the soundness of central counterparty clearing house risk management practices.

The ability to compare risk management practices across CCPs is becoming crucial for market participants following new regulations that force standardised over-the-counter derivatives to clear through central counterparties.

As debate continues over whether standardised stress tests would be beneficial for assessing CCP risk, the new ratings could provide an important means of comparison.

While some dealers and CCPs support standardised testing for risk comparison, others, including trade body IOSCO, warn that a one-size-fits-all testing framework would be difficult to design and could lead to the same risk management mistakes being made across all CCPs.

Under Moody’s proposals, the agency intends to establish a new Clearing Counterparty Rating that reflects a CCP’s ability to meet its clearing and settlement obligations to members and the financial loss that would result if it is unable to meet those obligations.

Read more: IFR

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