In the event of a default of a major clearing member, a CCP might not be able to allocate all the losses and liquidity shortfalls that may occur. Therefore, each CCP needs to have a recovery plan for allocating any residual losses and liquidity shortfalls so that it can ensure continuity of its clearing services even when normal defences have failed.
When bank loans to firms are provided based on short-term contracts, they are in fact refinanced many times, and so they function partly as quasi-capital. Banks are exposed to complex combinations of risks from sources that differ in nature, such as debt and equity, and this hinders the process of reallocating these risks appropriately among suitable investors.