Investing.com -- The Bank of England (BoE) announced on Friday that it will be conducting this year’s stress test of central counterparties, crucial components of the global financial infrastructure, under a scenario that simulates a market panic due to a trade war and sovereign debt risks.
The stress test will cover ICE Clear Europe (NYSE: ICE ), LCH Limited owned by London Stock Exchange Group (LSE:LON: LSEG ), and LME Clear Limited, which is under the ownership of Hong Kong Exchange and Clearing (HKEX:0388). The test will simulate a situation where two or more members default during a severe market stress event.
According to the BoE, the test is designed to simulate extreme market fluctuations over a period of two to five days, during which there is growing concern about fragmentation in global trade and sovereign debt risks. The goal of the test is to ensure that these key institutions can withstand such adverse conditions and continue to function effectively.
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