July 05, 2016

Cummings, Warren, Warner Launch Investigation Of Major Derivatives Clearing Organizations’ Recovery and Resolution Plans

Washington, DC - Today, Rep. Elijah E. Cummings (D-MD), Ranking Member of the House Committee on Oversight and Government Reform, and Senators Elizabeth Warren (D-MA) and Mark Warner (D-VA), members of the Senate Banking Committee, sent letters to two systemically important derivative clearing organizations (DCO)-CME, Inc. and Ice Clear Credit LLC-requesting information on the firms' recovery and resolution plans.

"Like the nation's largest banks, systemically important DCOs are required to create resolution plans that would be implemented as needed to guide their orderly failure," the Members wrote. "However, the public lacks information about DCO resolution plans, and we do not know whether the plans are credible. Because it is concerning that the resolution plans of several of the largest banks were recently deemed not credible, we are seeking information to understand whether the resolution plans for DCOs are not credible as well."

The letter requests the firms' final recovery and resolution plans, and specific information on whether the plans have been reviewed by federal regulators, which events trigger the plans' execution, how clearing services are isolated from other activities, and to what extent the firms have addressed the systemic risks they may face.

The Members' letter follows their introduction last week of the Derivatives Oversight and Taxpayer Protection Act, which would build on the Dodd-Frank Act to address each of these problems and help ensure that derivatives will not be the cause of another financial crisis.

Click here to read the letter to CME, Inc.

Click here to read the letter to Ice Clear Credit, LLC.