CCPs vulnerable from reverse repo investments – Esma

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Investments of cash balances in repo transactions could leave central counterparties (CCPs) exposed in a liquidity stress event, potentially leading to uncovered exposures, the European Securities and Markets Authority (Esma) found in its latest round of stress-testing.

The European regulator attributed this to low levels of haircuts and varied market risk profiles of the collateral for reverse repos used to secure cash.

The 16 CCPs analysed in the latest exercise reported €164.7 billion ($178.1

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