February 2, 2018 / 6:26 AM / 21 days ago

EU clearing house system passes stress test

LONDON, Feb 2 (Reuters) - The European Union’s overall system of clearing houses for securities remained resilient for extreme, simulated market shocks, the bloc’s securities watchdog said on Friday.

The results of the second EU-wide stress test showed the system could cope with several users of clearing houses defaulting at the same time coupled with extreme market shocks, the European Securities and Markets Authority (ESMA) said in a statement.

On an individual basis, Spain’s BME Clearing showed a minor shortfall of required pre-funded resources under one aspect of the test, ESMA said.

ICE Clear Europe’s pre-funded resources would be enough, but these would only marginally cover the simulated stress losses, ESMA added.

Clearing houses are backed by pre-funded default funds and stand between two sides of a stock, bond or derivatives trade, ensuring its completion even if one side of the transaction goes bust. (Reporting by Huw Jones; Editing by Amrutha Gayathri)

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