Part I Introduction, 3 A Systemic Assessment of the Financial Market Infrastructures Landscape: FMI Groups and their Implications

Abstract

This chapter assesses the systemic relevance of financial market infrastructure (FMI) groups. It takes a closer look at the different organisational models of FMI groups and the resulting risks, and examines how these risks have been addressed in recent international standards and legislation within the US and the EU. International standard-setting bodies, such as the Committee on Payments and Market Infrastructures (CPMI) in cooperation with the International Organization of Securities Commissions (IOSCO), have long acknowledged the importance of FMIs as being at the 'core' of the global financial system. While a number of large and interconnected financial firms have failed in a spectacular manner during the recent financial crisis, no central counterparty (CCP) or any other systemically important FMI has failed despite the significant stress experienced. Following calls by the G-20 after the financial crisis, trade repositories (TRs) and CCPs have extended their services to the over-the-counter (OTC) derivatives market providing powerful risk mitigation. The chapter then turns to the treatment of FMI operators with a banking licence and their treatment in the European regulatory framework for credit institutions. Risk-sensitivity and proportionality of regulatory requirements are identified as key challenges for the application of bank capital and organisational requirements to providers of FMI.