Financial market infrastructures operate at the heart of the financial system and contribute to its good functioning. Their central position in the financial ecosystem implies that they concentrate a number of risks, including:
The risks inherent in financial market infrastructures
- settlement (or financial) risk. There are two types:
- credit risk is the risk of loss stemming from a counterparty's failure to meet its contractual obligations at the specified date or in the future;
- liquidity risk is the risk that a participant in an infrastructure has insufficient funds or securities to meet, partially or wholly, an obligation at the specified date, even if the participant is not insolvent;
- operational risk is the risk of a loss resulting from inadequate or failed internal processes, people, systems or external events.
- legal risk is the risk of a loss resulting from an unpredictable or ambiguous application of a law or regulation, or from a situation where it is impossible to execute a contract.
- systemic risk is the risk that a particular event affecting the infrastructure, resulting notably from a financial or operational risk, leads by a chain reaction to significant disruptions on all capital markets that are liable to produce nearly simultaneous large adverse effects on most or all of the economy.
The financial crisis of 2008 was an important test for the resilience of financial market infrastructures, which proved their robustness. Their contribution to the transparency of financial markets led the G20 to promote their use, including by mandating the central clearing of OTC derivatives transactions.
The growing importance of their role has led to the strengthening of the regulatory standards applicable to financial market infrastructures.