The CFTC Market Risk Advisory Committee ("MRAC") debated clearinghouse and vendor risk management issues in the Committee's third and last meeting of 2018. The MRAC also announced the appointment of the members of the recently established Interest Rate Benchmark Reform Subcommittee.
At the meeting, regulators and industry members debated:
- current risk management and clearinghouse governance issues;
- "management approaches to non-default losses"; and
- the oversight of third-party service providers and vendor risk management.
Commissioner Rostin Behnam, the sponsor of MRAC, focused on issues "related to clearing, including the roles and responsibilities of central counterparties . . . in monitoring and managing the variety of risks arising from stresses including, but not limited to, a clearing member default." He applauded the "tectonic shift" to that the clearing mandate has fostered in the swaps marketplace, but noted that "these benefits have not come without costs, and there remain concerns regarding whether the regulatory structure properly accounts for risk in terms of capital, margin, and leverage."
Commissioner Rostin Behnam also announced the new members of the Interest Rate Benchmark Reform Subcommittee, including its Chair, Thomas Wipf, Vice Chair of Institutional Securities at Morgan Stanley, and 21 participating members. The CFTC created the Subcommittee to make recommendations to the MRAC on the transition of U.S. dollar derivatives and related contracts to the Secured Overnight Financing Rate.
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