Oslo Clearing ASA Self Assessment ESCB-CESR Recommendation

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Oslo Clearing monitors its aggregate exposure towards each individual custodian, and also the custodian’s financial resources and operational capacity on an ongoing basis. Oslo Clearing has established standards for the approval of all bank guarantors and guarantees, which are issued in favour of Oslo Clearing. 2. How is cash invested? Are investments secured? What standard does the CCP use to ensure that obligors are highly creditworthy? What standard does the CCP use to ensure that investments have minimal market and liquidity risks? Does the CCP invest its own capital or margin that it intends to use for risk management purposes in its own securities or those of its parent company? How is cash invested? Are investments secured? The own resources, which includes own funds and margins paid to Oslo Clearing by the clearing members, shall be invested in instruments with low credit, market and liquidity risk, in accordance with the Policy for Credit and Market Risk. The Policy requires that at least 80 pct. of the own resources are held in cash, while the remaining may be invested in interest rate instruments. No more than 50 pct. of the own resources may be held in one institution. For cash deposits, the institution shall have an "A" rating (S&P, or a corresponding rating from Moody's or Fitch) or higher. What standard does the CCP use to ensure that obligors are highly creditworthy? Credit institutions approved for holding member's collateral are monitored by Oslo Clearing. This also apply for those institutions holding the own resources of Oslo Clearing. Oslo Clearing has a comprehensive and conservative limit structure for its credit exposure and conforms to this structure. The limit structure has been approved by the Board of Directors and is reviewed regularly. Oslo Clearing performs a credit assessment of obligors and debt issues comparable to any other credit assessment performed to limit undesired exposures. The securities depositories approved to hold equities and interest rate instruments as collateral are monitored against the CPSS-IOSCO or the ESCB-CESR Self-Assessment. What standard does the CCP use to ensure that investments have minimal market and liquidity risks? Investments are limited to managing Oslo Clearing's own resources. In accordance with the Policy for Credit and Market Risk, Oslo Clearing may not take any substantial credit, market, liquidity or foreign exchange risk. Oslo Clearing monitors the credit quality of its investment portfolio, as well as containing market risk exposures in line with limits defined by the Policy for Credit and Market Risk. The liquidity risk in the investment portfolio is assessed as a part of the investment decision process, as well as being monitored on an ongoing basis. Does the CCP invest its own capital or margin that it intends to use for risk management purposes in its own securities or those of its parent company? Oslo Clearing does not place any funds in its own securities or those of its parent company. 38/69
3. Does the CCP consider its overall exposure to an obligor in choosing investments? Are investments limited to avoid concentration of credit risk exposures? How? Oslo Clearing considers its overall exposure towards any single bank including its own credit exposure. In this monitoring process all cash exposures are taken into account, both those held by the customers pledged towards Oslo Clearing and Oslo Clearing’s own funds. Bank exposure is continuously monitored, reviewed and reported internally. Oslo Clearing initiates risk-mitigation actions when concentrations are deemed unsustainable. Assignment of assessment: Entities holding collateral for Oslo Clearing (in compliance with the relevant ESCB- CESR / CPSS-IOSCO Recommendations) employ accounting practices, safekeeping procedures, internal and external controls, insurance, and other compensation schemes to fully protect securities. The legal framework protects securities against the claims of a custodian’s creditors. Oslo Clearing deems there is little risk of delay in its access to securities held with the custodians (Q1). Claims are on high quality obligors and investments are secured. The investments of Oslo Clearing can be liquidated quickly with little if any adverse price effect. Oslo Clearing has not invested its own capital or margin that it intends to use for risk management purposes in its own securities or those of its parent company (Q2). Oslo Clearing takes into account its overall exposure to an obligor in setting concentration limits for investments with these obligors (Q3), and taking necessary action on limit breaches. The recommendation 7 on custody and investment risk is observed 8 - Operational Risk A CCP should identify sources of operational risk, monitor and regularly assess them. The CCP should minimise these risks through development of operative systems, and effective control procedures. Functions and related systems should be (i) reliable and secure (ii) based on sound technical solutions (iii) developed and maintained in accordance with proven procedures and (iv) have adequate, scalable capacity. The CCP should have appropriate business continuity and disaster recovery plans that allow for timely recovery of operations and fulfilment of a CCP’s obligations. Systems should be subject to frequent and independent audits. Observing Recommendation 8 1. Does the CCP have a process for actively identifying, monitoring, assessing and minimising its operational risk, including risks arising from its outsourced operations and its other activities? Are operational risk policies and procedures clearly defined? The Regulation on Risk and Internal Control of 22 September 2008 No 1080 impose duties on routines and procedures for identifying, monitoring, controlling and 39/69
Page 1 and 2: Oslo Clearing ASA 26.06.2012 Self A
Page 3 and 4: capital requirements for clearing h
Page 5 and 6: The Financial Collateral Act, imple
Page 7 and 8: 1.2 Oslo Clearing’s evaluation of
Page 9 and 10: Equity segment: The Equity Clearing
Page 11 and 12: Valid and perfected pledge of colla
Page 13 and 14: Are the rules, procedures, and cont
Page 15 and 16: including with regard to that the i
Page 17 and 18: Oslo Clearing has established requi
Page 19 and 20: 3. Are participation requirements o
Page 21 and 22: Oslo Clearing has an automated surv
Page 23 and 24: Are [margins] sufficient to cover a
Page 25 and 26: Oslo Clearing issues margin require
Page 27 and 28: Stress tests are run daily. The str
Page 29 and 30: Figure 1: Order of Resources and Me
Page 31 and 32: 3. Are any of the resources that th
Page 33 and 34: held on individual deposit accounts
Page 35 and 36: the segregated account structure Os
Page 37: Oslo Clearing accepts collateral in
Page 41 and 42: 3. Does the CCP have a business con
Page 43 and 44: Oslo Clearing has processes and pro
Page 45 and 46: 3. If the private settlement agent
Page 47 and 48: If the settlement system used by th
Page 49 and 50: The agreement between Oslo Børs an
Page 51 and 52: Oslo Clearing and LCH perform revie
Page 53 and 54: contractual and regulatory framewor
Page 55 and 56: Oslo Clearing benchmarks its servic
Page 57 and 58: Regulation for internal control req
Page 59 and 60: equired by legislation. The Control
Page 61 and 62: Has that procedure been already use
Page 63 and 64: Does the CCP publicly and clearly d
Page 65 and 66: Clearing System The system used by
Page 67 and 68: Requirements. Marketplace Oslo Bør
Page 69: Appendix 2 last updated: 26.06.2012

Oslo Clearing ASA Self Assessment ESCB-CESR Recommendation

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