Featured Product

    EU Approves European Council Proposal on CCP Recovery and Resolution

    December 04, 2019

    EU ambassadors approved the position of European Council on a proposed framework for clearing houses and their authorities to prepare for and deal with financial difficulties. They invited the presidency to start negotiations with the European Parliament as soon as possible. The proposed regulation of the European Parliament and of the Council on a framework for the recovery and resolution of central counterparties (CCPs) amends Regulations (EU) No 1095/2010, (EU) No 648/2012, and (EU) 2015/2365 and Directives 2002/47/EC, 2004/25/EC, 2005/56/EC, 2007/36/EC, 2011/35/EU, and (EU) 2017/1132. The regulation shall enter into force on the twentieth day following that of its publication in the Official Journal of the European Union.

    The proposed rules aim to provide national authorities with adequate tools to manage crises and to handle situations involving CCP failures. They build on the same principles as the recovery and resolution framework applying to banks. The main objectives of the reform are to preserve clearing houses' critical functions, to maintain financial stability, and to prevent taxpayers from bearing the costs associated with the restructuring and the resolution of failing clearing houses. The proposed framework takes into account the global and systemic nature of CCPs. It provides for close coordination between national authorities in the framework of "resolution colleges" to ensure that resolution actions are applied in a coherent manner, taking into consideration the impact on affected stakeholders and financial stability. The position of European Council sets out a three-step approach:

    • The framework will be based on prevention and preparation. CCPs and resolution authorities are required to draw up recovery and resolution plans on how to handle any form of financial distress which would exceed a CCP's existing resources. If resolution authorities identify obstacles to resolvability in the course of the planning process, they can require a CCP to take appropriate measures.
    • Supervisory authorities have the possibility to intervene at an early stage—that is, before the problems become critical and the financial situation deteriorates irreparably. For example, they can require a CCP to undertake specific actions in its recovery plan or to make changes to its business strategy or legal or operational structure.
    • In the unlikely case of a CCP failure, national authorities can use resolution tools. These include the use of write-down of instruments of ownership, a cash-call to clearing members, the sale of the CCP or parts of its business, or the creation of a bridge CCP. While in certain limited cases, extraordinary public support may be provided as a last resort, the purpose of resolution actions is to minimize the extent to which the cost of the failure of a CCP is borne by taxpayers, while ensuring that shareholders bear an appropriate part of the losses.

    The Council suggests that the new framework should start applying two years after the date of entry into force of the regulation to allow time to adopt all implementing measures and for market participants to take the necessary steps to comply with the new rules. The European Parliament established its first reading position on this file in March 2019. Trialog negotiations are, therefore, ready to start as soon as possible.


    Related Links

    Effective Date: OJ+20 Days (Proposed)

    Keywords: Europe, EU, Banking, Securities, OTC Derivatives, EMIR, CCPs, Recovery and Resolution, SFTR, European Parliament, European Council

    Featured Experts
    Related Articles

    ESAs Issue Multiple Regulatory Updates for Financial Sector Entities

    The three European Supervisory Authorities (ESAs) issued a letter to inform about delay in the Sustainable Finance Disclosure Regulation (SFDR) mandate, along with a Call for Evidence on greenwashing practices.

    November 15, 2022 WebPage Regulatory News

    ISSB Makes Announcements at COP27; IASB to Propose IFRS 9 Amendments

    The International Sustainability Standards Board (ISSB) of the IFRS Foundations made several announcements at COP27 and with respect to its work on the sustainability standards.

    November 10, 2022 WebPage Regulatory News

    IOSCO Prioritizes Green Disclosures, Greenwashing, and Carbon Markets

    The International Organization for Securities Commissions (IOSCO), at COP27, outlined the regulatory priorities for sustainability disclosures, mitigation of greenwashing, and promotion of integrity in carbon markets.

    November 09, 2022 WebPage Regulatory News

    EBA Finalizes Methodology for Stress Tests, Issues Other Updates

    The European Banking Authority (EBA) issued a statement in the context of COP27, clarified the operationalization of intermediate EU parent undertakings (IPUs) of third-country groups

    November 09, 2022 WebPage Regulatory News

    OSFI Sets Out Work Priorities and Reporting Updates for Banks

    The Office of the Superintendent of Financial Institutions (OSFI) published an annual report on its activities, a report on forward-looking work.

    November 07, 2022 WebPage Regulatory News

    APRA Finalizes Changes to Capital Framework, Issues Other Updates

    The Australian Prudential Regulation Authority (APRA) finalized amendments to the capital framework, announced a review of the prudential framework for groups.

    November 03, 2022 WebPage Regulatory News

    BIS Hub and Central Banks Conduct CBDC and DeFI Pilots

    The Bank for International Settlements (BIS) Innovation Hubs and several central banks are working together on various central bank digital currency (CBDC) pilots.

    November 03, 2022 WebPage Regulatory News

    ECB Sets Deadline for Banks to Meet Its Climate Risk Expectations

    The European Central Bank (ECB) published the results of its thematic review, which shows that banks are still far from adequately managing climate and environmental risks.

    November 02, 2022 WebPage Regulatory News

    ESAs, ECB, & EC Issue Multiple Regulatory Updates for Financial Sector

    Among its recent publications, the European Banking Authority (EBA) published the final standards and guidelines on interest rate risk arising from non-trading book activities (IRRBB)

    October 31, 2022 WebPage Regulatory News

    EC Adopts Final Rules Under CRR, BRRD, and Crowdfunding Regulation

    The European Commission (EC) recently adopted regulations with respect to the calculation of own funds requirements for market risk, the prudential treatment of global systemically important institutions (G-SIIs)

    October 26, 2022 WebPage Regulatory News
    RESULTS 1 - 10 OF 8582