A central counterparty must—
| (a) |
conduct reverse stress tests which are designed to identify under which market conditions the combination of its margin, default fund and other financial resources may provide insufficient coverage of credit exposures and for which its liquid financial resources may be insufficient; |
| (b) |
when conducting reverse stress tests, model extreme market conditions that go beyond what are considered plausible market conditions, in order to help determine the limits of its models, its liquidity risk management framework, its financial resources and its liquid financial resources; |
| (c) |
develop reverse stress tests tailored to the specific risks of the markets and of the contracts that it performs clearing functions for; |
| (d) |
use the conditions identified and the results and analysis of its reverse stress tests to help in identifying extreme but plausible scenarios in accordance with Regulation 39; and |
| (e) |
periodically report its reverse stress testing results and analysis in a form that does not breach confidentiality to the risk committee in order to seek their advice in its review. |
National Environmental Management Act, 1998 (107 of 1998)
