By Huw Jones
LONDON, May 18 (Reuters) – LCH.Clearnet moved to reassure markets on Tuesday that its capital base was adequate despite a ratings downgrade at a time when regulators are finalising laws to force banks to clear vast numbers of derivatives.
Standard & Poor’s placed LCH.Clearnet’s rating on “negative credit watch” last week after one of its biggest customers, the transatlantic exchange NYSE Euronext said it would stop using the Anglo-French clearer from late 2012.
“The clearing activity itself is not dependent upon the creditworthiness of the clearing house,” LCH.Clearnet Chief Executive Roger Liddell told an industry conference.
LCH.Clearnet has more than 3 billion euros of capital and this is dwarfed “into almost insignificance” by the 55 billion euros put up the company’s users, Liddell said.
“So the risk of the system is effectively underwritten by all of its participants who have a lot of their capital on the line,” Liddell said.