Moody’s offers CCP ratings
24 June 2015 New York
Image: Shutterstock
Moody’s has proposed a global methodology for rating central counterparties (CCPs) and invited market participants to provide feedback.
The proposed methodology considers CCPs' clearing member default-management capabilities and related structural protections, as well as their business and financial fundamentals and operating environments.
The new Clearing Counterparty Rating (CCR) will reflect Moody's opinion of a CCP's ability to meet its clearing and settlement obligations to its clearing members (probability of default) and the financial loss that would result if a CCP were unable to meet such obligations (severity of loss), according to the rating agency.
CCPs began to play a critical role in financial markets since regulators made it mandatory to centrally clear over-the-counter derivatives. “This increased channeling of financial market activity to the clearinghouse has made the role of the CCP critical to the health of the financial system.”
Market participants have until 21 August to provide feedback on the proposed methodology.
The proposed methodology considers CCPs' clearing member default-management capabilities and related structural protections, as well as their business and financial fundamentals and operating environments.
The new Clearing Counterparty Rating (CCR) will reflect Moody's opinion of a CCP's ability to meet its clearing and settlement obligations to its clearing members (probability of default) and the financial loss that would result if a CCP were unable to meet such obligations (severity of loss), according to the rating agency.
CCPs began to play a critical role in financial markets since regulators made it mandatory to centrally clear over-the-counter derivatives. “This increased channeling of financial market activity to the clearinghouse has made the role of the CCP critical to the health of the financial system.”
Market participants have until 21 August to provide feedback on the proposed methodology.
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