CCPs and banks at odds over custodian losses
Market participants do not see eye-to-eye on loss sharing in the event of custody bank failure
Clearing banks and central counterparties each think the other should be on the hook to cover losses stemming from the failure of a custodian or settlement bank that processes and safeguards collateral on the CCP’s behalf.
The collapse of a custodian could have catastrophic consequences for a clearing house and its users, stymieing the CCP’s ability to protect and monetise assets, as well as engaging in basic functions such as taking in and paying out variation margin payments. However, market
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