DTCC’s Emerging and Systemic Risk function is responsible for the identification and evaluation of threats, both internal and external, that could have systemic implications for DTCC, its subsidiaries and their members/participants/clients, or the markets in which DTCC operates.
“Systemic risk” is the risk that the effect of an adverse event or series of events within the broadly defined financial services industry, including the financial industry’s critical infrastructures, caused by members or inflicted through external channels, is transmitted across the industry, markets, products and/or structures. This transmission, in turn, may lead to severe impairment, disruption or degradation of the effectiveness and/or efficiency of the intermediation function, which may also impair the unencumbered functioning of critical infrastructures such as DTCC.
The Emerging and Systemic Risk function reflects DTCC’s recognition of the critical role it plays in the securities industry and the designation by the Financial Stability Oversight Council (FSOC) of DTC, NSCC and FICC as Systemically Important Financial Market Utilities (SIFMUs). A key component of its responsibilities includes management of DTCC’s Interconnectedness Risk Initiative, which is an ongoing cross-functional effort designed to better understand the risks associated with the potential failure of entities that are interconnected with a DTCC SIFMU / Clearing Agency to function as expected.