When it comes to covering investment risk, the size of the initial margin could be an important metric to determine the size of losses that may crystallise. As set out in Chart 2 below, an internal ECB stocktake of the capital held by eight major EU CCPs, based on publicly available information, showed that capital amounts to less than 2% of initial margin holdings.
This appears rather low in view of the prospectively very significant market movements during a CCP recovery situation and also considering the highly demanding requirements for taking into account large-scale market movements when calibrating CCPs’ financial resources for default-related losses.