The Federal Reserve Chairman is seeking strict risk management oversight of clearinghouses used for financial trading, Bloomberg reports. The tough rules will help lower the chance that they will require emergency government aid, said Ben Bernanke. The regulatory regime for clearinghouses should include prudential requirements for credit and liquidity risk management, default procedures, cash buffers and collateral, he added. Under the Dodd-Frank bill, most private derivatives contracts will have to go through clearinghouses, so that the clearinghouse can stand between the two parties and assume the risk if one party defaults, adds Reuters.
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