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The CCP-bank nexus in the time of Covid-19

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  • Wenqian Huang
  • Előd Takáts

Abstract

During the Covid-19-induced financial turbulence, central counterparties (CCPs) issued large margin calls, weighing on the liquidity of clearing member banks. In spite of the turbulence, CCPs remained resilient, as intended by the post-crisis reforms of financial market infrastructures. Higher margins should be expected during heightened turbulence, but the extent of the procyclicality of margining is the consequence of various design choices. Systemic considerations call to examine the nexus between banks and CCPs. Therefore, when thinking about margining, central banks need to assess banks and CCPs jointly rather than in isolation.

Suggested Citation

  • Wenqian Huang & Előd Takáts, 2020. "The CCP-bank nexus in the time of Covid-19," BIS Bulletins 13, Bank for International Settlements.
    • Handle: RePEc:bis:bisblt:13
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    Cited by:

    1. Iñaki Aldasoro & Wenqian Huang & Esti Kemp, 2020. "Cross-border links between banks and non-bank financial institutions," BIS Quarterly Review, Bank for International Settlements, September.
    2. Sirio Aramonte & Andreas Schrimpf & Hyun Song Shin, 2023. "Non-bank financial intermediaries and financial stability," Chapters, in: Refet S. Gürkaynak & Jonathan H. Wright (ed.), Research Handbook of Financial Markets, chapter 7, pages 147-170, Edward Elgar Publishing.
    3. Iñaki Aldasoro & Egemen Eren & Wenqian Huang, 2021. "Dollar funding of non-US banks through Covid-19," BIS Quarterly Review, Bank for International Settlements, March.
    4. Gerba, Eddie & Katsoulis, Petros, 2021. "The repo market under Basel III," Bank of England working papers 954, Bank of England.
    5. Hüser, Anne-Caroline & Lepore, Caterina & Veraart, Luitgard, 2021. "How does the repo market behave under stress? Evidence from the Covid-19 crisis," Bank of England working papers 910, Bank of England, revised 18 Jun 2021.

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