Wednesday, September 16, 2026Published from Singapore
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CCPs Face New Risks & Opportunities from NBFI Growth

The argument

Central counterparties (CCPs) face a complex operating environment shaped by non-bank financial institutions' increasing market presence, rapid technological advancements, and the nascent integration of tokenisation, necessitating enhanced oversight and adaptive risk management frameworks.

By Lena Ho31 August 20264 min read
Photo: alexanderjungmann / Pixabay

The Evolving Mandate of Central Counterparties

Central counterparties (CCPs) were established with the primary objective of enhancing financial stability. This was achieved by simplifying the intricate web of counterparty exposures among financial institutions and reducing the aggregate volume of these exposures, a directive promoted by G20 leaders.

The effectiveness of CCPs in fulfilling this role depends critically on their governance structures, risk controls, and the adequacy of their financial resources.

International standards for financial market infrastructures (FMIs) have consequently been developed and strengthened, alongside intensified oversight, to ensure CCPs maintain sufficient resilience against shocks and can perform their intended financial stability function.

However, the financial system is currently undergoing fundamental transformations and experiencing a multiplication of external shocks, which introduce both opportunities and risks for CCPs, as noted by Mr Denis Beau, First Deputy Governor of the Bank of France, in a speech on 23 June 2026.

Non-Bank Financial Institutions Drive Clearing Expansion

The growing influence of non-bank financial institutions (NBFIs), including investment funds, hedge funds, pension funds, and insurance companies, represents a significant shift. These entities now account for a larger share of activity across various market segments, particularly in repo markets.

For instance, NBFIs were responsible for more than 40% of non-centrally cleared euro-denominated cash borrowing repo transactions by 2026, an increase from less than 30% at the close of 2020, according to the Bank of France. This expansion is partly driven by the sustained increase in public debt issuance in the euro area since 2008.

However, this shift can introduce vulnerabilities, as demonstrated by market disturbances such as the March 2020 'dash for cash' episode and the 2022 UK gilt crisis, which exposed how some NBFI business models can amplify market stress through excessive leverage.

Central clearing offers a mechanism to mitigate these vulnerabilities by centralising and mutualising counterparty risk, thereby limiting contagion and ensuring market continuity during periods of stress.

Mandatory Clearing and Buy-Side Access

In response to the vulnerabilities associated with NBFIs, regulatory bodies are moving towards mandatory clearing. The Securities Exchange Commission (SEC) in the United States introduced a mandatory clearing requirement in 2023, which is expected to progressively cover approximately 80% of the US Treasury repo market.

Discussions on similar measures are also underway at the European Systemic Risk Board (ESRB) and the Bank of England. This regulatory push creates commercial and strategic opportunities for CCPs to broaden access to central clearing for non-bank participants.

To facilitate this, CCPs have begun developing sponsored clearing arrangements, designed to enable buy-side entities to access CCPs while maintaining robust risk management standards.

While these models are widely adopted in the United States, particularly within the US Treasury repo market, Europe is at an earlier stage of development, with sponsored clearing models representing merely 5.8% of total repo transactions, as noted by the Bank of France in June 2026.

Technological Innovation and Collateral Management

Beyond regulatory developments, technological innovation is reshaping the operating landscape for CCPs. The adoption of cloud technologies is progressing across financial market infrastructures, promising improvements in operational efficiency, scalability, and resilience. Artificial intelligence (AI) technologies also present substantial potential.

While advanced machine learning can enhance anomaly detection and threat identification for cybersecurity, AI can also drive process automation, optimise resource allocation, and improve real-time risk monitoring, according to analysis presented by the Bank of France in June 2026. Furthermore, the development of tokenisation is an area of exploration for CCPs.

The expected benefits are twofold: enhanced efficiency and accessibility in collateral management through the integration of distributed ledger technologies (DLT), allowing for the instant transfer of natively tokenised securities; and the potential expansion of eligible collateral pools, provided new tokenised assets meet established eligibility criteria.

Discussions on this subject are ongoing at the EU level within ESMA and at the Bank of England, which recently launched a public consultation with the UK Financial Conduct Authority. The United States, through the Commodity Futures Trading Commission (CFTC), is further advanced in this area.

Implications for Asian Financial Market Infrastructures

The transformations in global financial markets, as highlighted by the Bank of France, have direct implications for Asian financial market infrastructures and their overseers. Asian CCPs will need to assess their readiness to accommodate increased participation from non-bank financial institutions, particularly as regional repo markets evolve.

The adoption of sponsored clearing models, which represent 5.8% of European repo transactions, could offer a blueprint for expanding access in Asia, requiring careful consideration of risk management standards.

Furthermore, investment in cloud technologies and AI capabilities will be crucial for Asian CCPs to enhance operational efficiency and cybersecurity, aligning with global trends. The exploration of tokenisation for collateral management, as discussed by ESMA and the Bank of England, presents a long-term opportunity for Asian markets to improve liquidity and efficiency.

Asian regulators should monitor developments in the US Treasury repo market, where the SEC’s 2023 mandate will progressively cover 80% of transactions, as a potential indicator of future regulatory direction for mandatory clearing in Asia.

This analysis is journalism, not investment advice; consult a licensed professional before making financial decisions.

Pieces are credited to the desk that commissioned and edited them. Our editorial standards, and the desks behind them, are set out on the Editorial Standards and Team pages.

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