Clearinghouses used for derivatives trades can be vulnerable and potentially spread risks through the financial system, according to a U.S. Treasury report.
The Treasury's Office of Financial Research (OFR) said Wednesday that threats to stability have increased slightly in the past year. Its assessment of risks in the financial system, however, hasn't been affected by the Federal Reserve's decision to raise interest rates in December. The Fed's monetary policy makers decided Wednesday to leave rates unchanged following a two-day meeting in Washington.
Clearing trades at a central location, rather than between dealers or between dealers and clients, helps reduce the likelihood of counterparties defaulting, but clearinghouses can lead to systemic risks if they don't have sufficient resources to cover payments, or margin, according to the research office's fourth annual report.
Complete your profile to continue reading and get FREE access to Treasury & Risk, part of your ALM digital membership.
Your access to unlimited Treasury & Risk content isn’t changing.
Once you are an ALM digital member, you’ll receive:
- Thought leadership on regulatory changes, economic trends, corporate success stories, and tactical solutions for treasurers, CFOs, risk managers, controllers, and other finance professionals
- Informative weekly newsletter featuring news, analysis, real-world case studies, and other critical content
- Educational webcasts, white papers, and ebooks from industry thought leaders
- Critical coverage of the employee benefits and financial advisory markets on our other ALM sites, PropertyCasualty360 and ThinkAdvisor
Already have an account? Sign In Now
*May exclude premium content© 2025 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
