Finance: Clearing Houses

House of Lords written question – answered at on 3 October 2011.

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Photo of Lord Myners Lord Myners Labour

To ask Her Majesty's Government whether they will review the ability of LCH Clearnet unilaterally to set margin requirements and specify "value hair cuts" and the risks so posed to financial stability.

Photo of Lord Sassoon Lord Sassoon The Commercial Secretary to the Treasury

The Government will establish in the Bank of England a Financial Policy Committee (FPC) to identify and monitor systemic risks to the stability of the financial system. An interim FPC is currently considering what tools the permanent FPC might need.

The draft legislation to establish the permanent FPC was published in a White Paper in June 2011 (Cm 8083). The draft legislation also includes detailed proposed changes to the regulatory regime in the Financial Services and Markets (2000) Act applying to recognised clearing houses (RCHs). RCHs that are central counterparties will also be subject to requirements in or under the proposed EU directive on over the counter derivative transactions, central counterparties and trade repositories currently under negotiation in Brussels.

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