The Failure of a Clearinghouse: Empirical Evidence

71 Pages Posted: 2 Nov 2016 Last revised: 28 Aug 2018

See all articles by Vincent Bignon

Vincent Bignon

Banque de France

Guillaume Vuillemey

HEC Paris - Finance Department

Multiple version iconThere are 3 versions of this paper

Date Written: August 25, 2018


How can we design safe financial institutions, and how should we efficiently resolve them? We study these questions by empirically analyzing the failure of a derivatives central clearing counterparty (CCP) in Paris in 1974. First, we identify the risk management failures that caused the default and draw implications for CCP design. Second, we show evidence of new agency problems arising when supervisors have discretionary powers over debt restructuring for a failed entity. These conflicts, between managers and the supervisor (misreporting), as well as between managers and creditors (risk-shifting), are difficult to mitigate with regulation or covenants. Their existence has implications for the design of recovery and resolution rules for financial institutions.

Keywords: Central Clearing; Failure; Risk Management; CCP; Collateral; Derivatives

JEL Classification: G23

Suggested Citation

Bignon, Vincent and Vuillemey, Guillaume, The Failure of a Clearinghouse: Empirical Evidence (August 25, 2018). Available at SSRN: or

Vincent Bignon

Banque de France ( email )

DGEI 49-1430
31 rue Croix des Petits Champs
Paris, 75001
+33142924330 (Phone)

Guillaume Vuillemey (Contact Author)

HEC Paris - Finance Department ( email )

1 rue de la Libération
Paris, Not Applicable 78351
+33660204275 (Phone)


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