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Banking Essentials - Part I

This pathway will walk us through the basics of banks, starting with some of the different types and their main functions, then starting to look at the regulation faced by the banks, both before and after the Global Financial Crisis.

Greenwashing

Greenwashing is the act of distributing false information about something being more environmentally friendly than it actually is.

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Tackling the Cost of Living Crisis

In this video, Max discusses the cost-of-living crisis currently enveloping the UK. He examines its impact on households as well as the overall economy.

CSR and Sustainability in Financial Services

In the first video of this two-part video series, Elisa introduces us to sustainability. She begins by looking at the difference between sustainability and corporate social responsibility, two terms that can be easily confused.

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Banking Essentials - Part I

This pathway will walk us through the basics of banks, starting with some of the different types and their main functions, then starting to look at the regulation faced by the banks, both before and after the Global Financial Crisis.

Greenwashing

Greenwashing is the act of distributing false information about something being more environmentally friendly than it actually is.

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Expert led content

+1,000 expert presented, on-demand video modules

Learning analytics

Keep track of learning progress with our comprehensive data

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Engage with our video hotspots and knowledge check-ins

Testing & certification

Gain CPD / CPE credits and professional certification

Managed learning

Build, scale and manage your organisation’s learning

Integrations

Connect Finance Unlocked to your current platform

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More featured content

Tackling the Cost of Living Crisis

In this video, Max discusses the cost-of-living crisis currently enveloping the UK. He examines its impact on households as well as the overall economy.

CSR and Sustainability in Financial Services

In the first video of this two-part video series, Elisa introduces us to sustainability. She begins by looking at the difference between sustainability and corporate social responsibility, two terms that can be easily confused.

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What are Central Counterparties (CCPs)?

What are Central Counterparties (CCPs)?

Peter Eisenhardt

30 years: Capital markets & investment banking

Central Counterparties, or CCPs, reduce settlement and credit risk and costs by netting transactions between multiple counterparties. Peter explains how and why CCPs perform this function.

Central Counterparties, or CCPs, reduce settlement and credit risk and costs by netting transactions between multiple counterparties. Peter explains how and why CCPs perform this function.

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What are Central Counterparties (CCPs)?

1 min 53 secs

Overview

Central Counterparties (CCPs) are an essential entity for derivative trades in certain markets. They are successful in reducing risk, but can constitute a systemic risk under extreme conditions.

Key learning objectives:

  • Define CCPs and novation

  • Understand the significance of CCPs in the derivatives market

  • Outline examples of major CCPs

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Summary

What are Central Counterparties?

Central Counterparties (CCPs) are entities that interpose themselves as the counterparty to derivative trades in certain markets. In markets where CCPs operate, the CCP becomes the buyer to every seller and the seller to every buyer.

What is “novation”?

Novation - the legal process by which trades are transferred to the CCP.

Why are Central Counterparties important in the derivatives market?

Following the Global Financial Crisis, the G20 leaders formulated their ambition at the 2009 Pittsburgh summit that all standardised derivatives contracts should be cleared through CCPs because:

  • CCPs reduce settlement and credit risks and costs by netting offsetting transactions between multiple counterparties.
  • Counterparties of the CCP must post margin in case they cannot meet their obligations.
  • This requirement is especially important for derivatives, which can involve a stream of payments over years rather than a simple transfer of securities against cash for short settlement.

How risky are CCPs?

While CCPs are successful in reducing risk, in extreme conditions, multiple failures of counterparts to a CCP could theoretically lead to its own collapse, thereby representing a significant systemic risk. CCP reporting, pricing, margining, legal enforceability, and capitalisation are therefore paramount.

What are some examples of CCPs?

Examples of CCPs are:

  • NSCC - the U.S.
  • LCH Clearnet - the UK
  • Eurex - Germany
  • JSCC - Japan
  • Shanghai Clearing House - China

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Peter Eisenhardt

Peter Eisenhardt

Peter has over 30 years experience working in banking. He has held several senior positions in international investment banks. Peter is now the Secretary General of the International Council of Securities Associations

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