Risk Management Process
CCIL settles the CLS trades of its
members by becoming a third party settlement agency to UBS Switzerland AG. To
take care of the risks arising out of this arrangement, Settlement Banks
usually set limits for all entities settling through them.
To take care of such risks,
Settlement Banks usually set limits for all entities settling through them. As
a settlement agency, CCIL does not take any clean exposure on its members. Risk
management processes at CCIL are therefore designed in such a way that CCIL’s
exposure on a member on account of the outstanding CLS trades of the member is
covered through collateral or bank guarantees. The risk is monitored by setting
Exposure Limits for members, which are arrived at on the basis of the
CCIL sets two types of limits for a
member (both denominated in US Dollars).
i) Base CLS Limit – Minimum limit for each settlement date
ii) Additional CLS Limit - Only for specified settlement date