Bank of England may tighten capital rules for clearing houses
Financial institutions settling derivatives contracts may need to hold more capital to stop them requiring a government bailout if they fail.
David Bailey, head of financial market infrastructure at the Bank of England, said that clearing houses will need to increase capital reserves, much like banks are required.
As a result, volumes at clearing houses such as ICE and CME will experience significant growth as banks are forced to increase safety and transparency by clearing their derivatives transactions through central counterparties.
Bailey said: "The Financial Stability Board has recently proposed that there must be a minimum level of 'Total Loss Absorbing Capacity' for banks, and we will need to consider carefully whether and how this concept could be effectively translated to CCPs [central counterparties]."