News from the Polish CCP KDPW

The Polish CCP KDPW has announced they now have live business in the Polish Zloty. The source story is here: http://www.kdpwccp.pl/en/kdpw_ccp/Pages/NewsDetails.aspx?idn=123, copied below. The total number of trades (when announced in November was 173 with a total notional of 24.2bn PLN / $6.1bn / £4.1bn.

PKO Bank Polski, the biggest Polish bank, has joined active participants of the clearing house KDPW_CCP in the clearing of OTC derivatives denominated in PLN. Trade clearing and guarantees are supported by a dedicated module otc_clearing.

The first OTC trades in PLN were cleared by KDPW_CCP in late May 2015. “Now eleven Polish banks clear interest rate derivatives in KDPW_CCP. We have cleared trades in an aggregate amount of more than PLN 24 billion since May,” said Iwona Sroka, President & CEO of KDPW_CCP and KDPW. “The services of an authorised CCP improve the security of the national financial system and the security of each bank. The credit risk of a counterparty to an original trade is taken over by the CCP, which operates an EMIR-compliant system of trade clearing guarantees in the event of default of a direct participant. As a result, according to CRDIV/CRR, the capital requirements for exposures under trades cleared by a qualified CCP are lower than in bilateral clearing. This provides banks with capital advantages and optimisation of the collateral portfolio. We expect that active participation of PKO Bank Polski will spark the growth of the Polish interbank market as the bank is one of the leading market players,” said Iwona Sroka.

“For PKO Bank Polski, trade clearing in KDPW_CCP is yet another step in building shareholder value. With the central clearing functionality, our bank reduces capital requirements, mitigates clearing risk and counterparty credit risk, and fulfils all regulatory requirements which are now European in scope. I do believe that the new form of clearing for the biggest local bank in a Polish CCP directly supports market liquidity, transparency and depth, and consequently enhances confidence in the quality of the interbank market in Poland,” said Jakub Papierski, Vice President of the Management Board supervising Corporate Market and Investment Banking Area.

“We have seen rising interest of banks in repo clearing in KDPW_CCP in the past weeks. We expect to clear the first repo trades in 2016,” said Iwona Sroka.

The OTC derivatives clearing service was launched in the Polish market to address EMIR requirements, whereby all OTC trades in derivatives of classes specified by ESMA (European Securities and Markets Authority) must be cleared in a CCP authorised by the EU. KDPW_CCP was authorised on 8 April 2014.

KDPW_CCP currently offers the clearing of the following OTC trades in PLN derivatives:

• Forward Rate Agreement
• Interest Rate Swap
• Overnight Index Swap
• Basis Swap
• REPO and sell/buy-back (in Polish Treasury bonds)

Once KDPW_CCP is authorised for EUR trade, derivatives including FRA, IRS, and OIS on EURIBOR/EONIA will also be cleared in EUR. With the authorisation, financial derivatives which are transferrable securities will be added to the basket of financial instruments cleared by KDPW_CCP.

The recent financial crisis eroded confidence in the inter-bank market, resulting among others in a sharp decrease in the number and value of OTC trades. Financial institutions as well as regulators began to identify solutions which could make the market stable and safe. The G-20 summit in September 2009 decided to introduce legal regulations requiring standardisation of OTC products and their clearing in CCP (central counterparty) clearing houses. Under the standards followed by clearing houses, risks can be transferred from many counterparties to a single counterparty: the clearing house which also manages the risks of transactions according to the regulatory requirements and in compliance with the highest standards.