Global Financial System Is ‘Unstable’ And Risk Of ‘Clearing System Seizure’, BIS Warns

– The pillars of the global financial system are fundamentally unstable which could lead to a frightening chain-reaction in the next crisis, BIS warns
– Giant “central counterparties” that clear the $540 trillion nexus of derivatives are vulnerable to failure in times of extreme stress
– The Bank for International Settlements said CCPs could cause “a destabilising feedback loop, amplifying stress” 
– Recent market ‘jolt’ will be first of many as easy money era ends – world’s top watchdog

by Ambrose Evans-Pritchard via Daily Telegraph

Credit: Bloomberg

The pillars of the global financial system are fundamentally unstable and could lead to a frightening chain-reaction in the next crisis, the world’s top watchdog has warned.

Giant “central counterparties” (CCPs) that clear much of the $540 trillion (£428 trillion) nexus of derivatives are themselves vulnerable to failure in times of extreme stress.

This is a worry looming ever larger as rising US interest rates expose the weak links in global debt markets.

The Bank for International Settlements (BIS) said in its quarterly report that the CCPs could cause “a destabilising feedback loop, amplifying stress.”

Full article on Daily Telegraph

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