LONDON, March 25 Britain's main securities
clearing house suffered an outage on New Year's Eve, the Bank of
England said on Monday, highlighting a problem with part of the
financial system seen as central to keeping markets stable.
LCH.Clearnet clears stock and derivatives trades, ensuring a
transaction is completed even if one side of the deal goes bust.
It also handles sterling and euro balances at the central bank.
The central bank regulates payment systems and on Monday
published its annual report on the sector, saying LCH.Clearnet
suffered a significant IT problem on Dec. 31.
Clearing and settlement houses are at the heart of
regulatory reform to make markets function more reliably and
transparently. The central bank will regulate clearers directly
"The nature of the problem created obstacles to reverting to
contingency arrangements and also hindered internal and external
communication," the bank said.
Crest, which settles trades so that ownership of a security
is exchanged for cash, also experienced a number of outages in
early 2012, the BoE said.
"These incidents were satisfactorily resolved on the days
concerned, but highlight the importance of robust operational
risk controls across all recognised systems," the bank said.
LCH.Clearnet has taken important steps to improve its
resilience, is investigating the causes of the incident and has
developed plans to prevent a recurrence, the bank said.
LCH.Clearnet said the incident was "fully communicated" to
regulators, exchanges, members and clients at the time.
"We identified the issue and took measures to ensure this
doesn't happen again. There were no financial losses as a
result," the clearer added.
The London Stock Exchange is buying a controlling
stake in LCH.Clearnet to capitalise on the regulatory push to
channel more transactions through clearing houses.