To ask Her Majesty’s Government whether central clearing houses in financial markets are required to prepare living wills; and what measures have been put in place to manage a capital failure.

To ask Her Majesty’s Government what assessment they have made of any increase to the economic risk supervised by the Prudential Regulatory Authority of the proposed merger of the London Stock Exchange and Deutsche Börse; whether obligations of the combined group will fall to the UK taxpayer; and whether there have been any discussions about risk sharing with the government of Germany.

UK legislation requires central counterparties (CCPs) to develop recovery plans and to have ‘loss allocation’ rules, in order to allocate any losses sustained by the CCP either following the default of a clearing member or due to certain non-default events, so that the CCP can continue to provide its critical functions.

The Government has also broadened the scope of the UK’s Special Resolution Regime to cover CCPs. When certain conditions are met, this allows the Bank of England to intervene by transferring all or some of the business of a CCP to either a private sector purchaser or to a bridge CCP owned by the Bank of England, or to transfer ownership of the CCP to any person.

Qualifying changes of control of CCPs are assessed by the Bank of England and I refer the noble Lord to my written answer HL7153 of 1 April 2016.