The Bank of England (BoE) has set out the structure for its 2025 stress test of UK central counterparties (CCPs), focusing on how they would cope with multiple member defaults under severe market conditions.
Published on 25 April, the BoE’s plan centres on a Credit Stress Test, assessing CCP resilience if two or more clearing members were to default during a market crisis. Reverse stress testing and sensitivity testing will also be included to explore how results vary under increasingly extreme assumptions.
This year’s programme will not feature a standalone liquidity stress test, marking a shift from previous exercises. Instead, liquidity risk will be reviewed qualitatively in discussions with CCPs, with an emphasis on how vulnerabilities may have changed since the last liquidity-focused tests.
Covers all UK CCPs
The stress test will cover the clearing services of all three UK-authorised CCPs: ICE Clear Europe, LCH Ltd, and LME Clear. Data for the exercise must be submitted using templates and instructions that the BoE has provided directly to the firms.
A report detailing the findings is scheduled for publication in the fourth quarter of 2025. According to the Bank of England, the stress test is intended to assess systemic resilience rather than evaluate individual CCPs publicly.
