ECSDA Publishes its Systemic Risk Indicators Report
FMIs, including CSDs, play a critical role in the financial system and the broader economy. While safe and efficient FMIs contribute to maintaining and promoting financial stability and economic growth, they also concentrate risk. If not properly managed, FMIs can thus be sources of financial shocks or a major channel through which these shocks are transmitted across domestic and international financial markets.
With the objective of contributing to safer financial markets, ECSDA Risk Management Working Group (RM WG) decided to set up a Task Force dedicated to deepening our understanding of systemic risk and the indicators allowing CSDs to identify, assess, measure, respond to, and report on systemic risk. From the outset, the Task Force focused on the potential exposures to macroeconomic stress for CSDs and the systemic risk implications of the interaction between CSDs and market participants for the financial ecosystem. The Task Force discussions revealed that systemic risk touches upon various other domains that deal with significant stress, disruption, or financial shocks, such as business continuity, disaster recovery, and recovery planning. It was, therefore, a challenge to approach some of these domains from a systemic risk perspective and leverage existing insights, while avoiding unnecessary overlap.
We concluded on a proposed set of indicators, structured in the form of a high-level systemic risk dashboard that is presented in the report. It was agreed that ECSDA RM WG Members will start using the proposed methodology, which may evolve and mature over time.
ECSDA and its Members would be pleased to exchange views with the relevant stakeholders on the occasion of this publication.