This framework requires non-EU CCPs that are critical for the EU to meet prudential requirements under the supervision of the European Securities and Markets Authority, with the involvement of the relevant EU central banks. This setup is essential in ensuring that appropriate safeguards for EU financial stability are in place, while risks of global financial fragmentation are minimised.
Strengthened capital and liquidity buffers and improved incentives to assess and manage risk should all help reduce the pro-cyclicality of the financial system, and, in the new configuration of the financial services industry more than ever, help monetary policy to attain its traditional objectives. But should monetary policy itself embody in its objective function the health of the financial system?