Under the new monetary framework, the Central Bank of Iceland has been  4  BIS Review 95/2001  provided with the same mechanisms as central banks in most industrialised countries for creating such an environment. The Central Bank takes this role seriously and will strive to fulfil the conditions laid down by the new legislation and in the joint declaration which it issued with the Government on March 27. The global economic climate has been dramatically transformed in recent years and is still changing in the wake of the terrorist attacks on the USA on September 11. It is quite obvious that we in Iceland do not carry much weight in global economic terms. However, the situation in our immediate environment, especially among our main trading partner countries, is crucial to us. At the moment we are having a somewhat stormy ride. In this new environment, the role of everyone involved in economic policy-making in Iceland will be to act in a disciplined and responsible fashion. Doing so will be the main way to contribute to economic growth and prosperity in Iceland. BIS Review 95/2001  5
UK CCPs were able to provide clearing services without disruption. However, the episode highlighted a feature of the reformed system: in periods of stress, losses are realised faster. Market participants are forced to post sufficient collateral that reflects the market volatility promptly. This is key to addressing the build-up of counterparty credit risk that had been at the root of the devastating global financial crisis. But it also meant that some market participants faced a liquidity crunch and a different type of panic as investors scrambled to get their hands on cash (and particularly U.S. dollars). Margin calls in aggregate were large over the stress period. Initial and variation margin increased significantly, with the increase in initial margin (IM) at major global CCPs totalling around $ in March 2020 and the increase in variation margin (VM) flows peaking at $ during the height of the stress in mid-March. [4] Central banks had to step in to restore market stability in a big way. Over the course of 2020, G10 central bank balance sheets rose by $ trillion. [5] Had central banks not acted, the financial stability consequences could have been severe. Russia-Ukraine The first quarter of 2022 saw another episode of unprecedented volatility across financial markets as Russia invaded its neighbour. Once again, we saw shocks, this time in some commodity and energy markets. Again, we saw big margin calls at CCPs. Losses (and corresponding gains) on derivative positions spiked across February and March 2022, primarily in markets experiencing the largest shocks.