LONDON (Reuters) -The Bank of England said on Thursday that the central counterparties (CCPs) in Britain’s financial system were “resilient” after publishing the conclusions of its first public stress test for ICE Clear Europe, LCH and LME Clear.

A BoE report, however, said the clearing house of the London Metal Exchange (LME) ran down nearly its full default fund under a stress test of its base metals service.

The LME was forced to halt nickel trading and cancel trades in early March after prices doubled to more than $100,000 per tonne in a surge sources blamed on short covering by one of the world’s top producers.

Central counterparties operating in London are a key part of the global financial system’s plumbing, due to their role in helping to clear trades between major financial institutions.

“While the stress test was exploratory, with no pass-fail assessments, the results are evidence of the overall resilience of the UK CCPs,” BoE Deputy Governor Jon Cunliffe said in a statement.

The BoE said it checked whether the CCPs were resilient to a market stress scenario and to the simultaneous default of the two largest clearing member groups.

“While results vary across CCPs, no CCP experienced full depletion of prefunded financial resources or a negative liquidity balance,” the BoE said.

“One CCP Clearing Service (LME Base), losses result in close to full depletion of the default fund when the bank’s estimates of concentration costs are included,” the report said.

British financial regulators including the BoE launched a sweeping probe in April into how the LME suspended nickel trading and the LME also commissioned its own independent review.

The BoE’s CCP exercise started in October 2021 and was designed to be as severe as the worst historical market stress scenario experienced by each CCP up to that point.

Recent weeks have witnessed record falls in some British government bond prices, and forced the BoE to stabilise the market due to the risk of a fire sale by liability-driven investment (LDI) funds used by the pensions industry.

“We will engage these CCPs on our findings, which will help the Bank target its supervision and inform CCPs’ approach to risk management,” Cunliffe said.

(Reporting by David Milliken; additional reporting by Eric Onstad; Editing by Kate Holton, John Stonestreet and Emelia Sithole-Matarise)