Clearing Firms Simulate Lehman-Like Default During Brexit Chaos
- Regulators asked to test clearinghouses during market shock
- Each clearing firm successfully completed hedging and auctions
A tourist boat travels along the River Thames towards the City of London skyline in London, U.K., on Wednesday, Oct. 28, 2015. In its monthly consumer confidence index, GfK said a measure of Britons' outlook for the economy over the next 12 months dropped to minus 4 in October, the lowest reading this year.
Photographer: Simon Dawson/BloombergThe first coordinated global test showed clearinghouses, the firewalls protecting the financial system from calamity, are strong enough to survive a major bank going bust.
Regulators wanted to know what would’ve happened if there’d been a Lehman Brothers Holdings Inc.-style collapse during a market shock like that of the Brexit vote last year. So they asked three major clearinghouses -- LCH, CME Clearing and Eurex Clearing -- to run a simulation.