MIR 4.8 MIR 4.8 Money settlement
Where a Recognised Clearing House conducts its money settlements using commercial bank money, it must adopt appropriate measures to minimise and strictly control the credit and liquidity risk arising from such use.
For the purposes of Rule 4.8.1, a Recognised Clearing House must:(a) conduct its money settlements using only such settlement assets with little or no credit or liquidity risk;(b) monitor, manage, and limit its credit and liquidity risks arising from commercial settlement banks. In particular, it must establish and monitor adherence to strict criteria for the use of settlement banks, which take into account, among other things, the regulation and supervision, creditworthiness, capitalisation, access to liquidity, and operational reliability of the relevant settlement banks; and(c) monitor and manage the concentration of credit and liquidity exposures to its commercial settlement banks, including, to the extent such banks are also Members ensure that its legal agreements with such settlement banks, at a minimum:(i) specify clearly when transfers on the books of individual settlement banks are expected to occur and when they are final;(ii) ensure that funds received are transferable as soon as possible, if not intra-day, at least by the end of the day to enable it and its Members and other participants on its facilities to manage their credit and liquidity risks; and(iii) not permit such banks to combine or offset any right or liability they or their affiliates may have in their capacity as a Clearing Member.
If a Recognised Clearing House does not conduct its money settlement on commercial bank money but on its own books, it should minimise and strictly control its credit and liquidity risks as appropriate.