As a result, the G-20 decided that all standardized over-the-counter (OTC) derivatives should be cleared through central counterparties (CCPs) by the end of 2012. CCPs can act as firewalls against the propagation of shocks across market participants. But in order to reap these benefits, CCPs have to be carefully designed and subject to robust regulation and supervision.
The Bank of Canada is responsible for overseeing major clearing and settlement systems for the purpose of controlling systemic risk.3 Two key infrastructure initiatives that we are involved in address systemic risk by enhancing the resiliency of the system. We are working with the industry to develop a domestic CCP for Canadian-dollar repos that will underpin the resiliency of that core funding market.