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
    News

    EU Amends CRD4 and CRD5 as Part of Capital Markets Recovery Package

    EU published Directive 2021/338, which amends the Markets in Financial Instruments Directive (MiFID) II and the Capital Requirements Directives (CRD 4 and 5) to facilitate recovery from the COVID-19 crisis.

    February 26, 2021 WebPage Regulatory News
    News

    EU Committee Recommends Systemic Risk Buffer of 4.5% in Norway

    The Standing Committee of the European Free Trade Association (EFTA) recommended that a systemic risk buffer level of 4.5% for domestic exposures can be considered appropriate for addressing the identified systemic risks to the stability of the financial system in Norway.

    February 25, 2021 WebPage Regulatory News
    News

    PRA Clarifies Approach to Onshoring of Credit Risk Rules for UK Banks

    In a recent statement, PRA clarified its approach to the application of certain EU regulatory technical standards and EBA guidelines on standardized and internal ratings-based approaches to credit risk, following the end of the Brexit transition.

    February 25, 2021 WebPage Regulatory News
    News

    FSB Sets Out Work Priorities for 2021

    In a recently published letter addressed to the G20 finance ministers and central bank governors, the FSB Chair Randal K. Quarles has set out the key FSB priorities for 2021.

    February 25, 2021 WebPage Regulatory News
    News

    EU Publishes Corrigendum to Revised Capital Requirements Regulation

    EU published, in the Official Journal of the European Union, a corrigendum to the revised Capital Requirements Regulation (CRR2 or Regulation 2019/876).

    February 25, 2021 WebPage Regulatory News
    News

    ESAs Issue Statement on Application of Sustainability Disclosures Rule

    ESAs published a joint supervisory statement on the effective and consistent application and on national supervision of the regulation on sustainability-related disclosures in the financial services sector (SFDR).

    February 25, 2021 WebPage Regulatory News
    News

    EC Consults on Crisis Management and Deposit Insurance Frameworks

    EC published a public consultation on the review of crisis management and deposit insurance frameworks in EU.

    February 25, 2021 WebPage Regulatory News
    News

    HKMA Enhances Loan Guarantee Scheme to Alleviate Pressure on SMEs

    HKMA announced that enhancements will be made to the Special 100% Loan Guarantee of the SME Financing Guarantee Scheme (SFGS) and the application period will be extended to December 31, 2021.

    February 24, 2021 WebPage Regulatory News
    News

    EBA Proposes Standards for Supervisory Cooperation Under IFD

    EBA launched consultations on the regulatory and implementing technical standards on cooperation and information exchange between competent authorities involved in prudential supervision of investment firms.

    February 24, 2021 WebPage Regulatory News
    News

    BoE Addresses Banks in Scope of First Resolvability Assessment

    BoE issued a letter to the CEOs of eight major UK banks that are in scope of the first Resolvability Assessment Framework (RAF) reporting and disclosure cycle.

    February 24, 2021 WebPage Regulatory News
    RESULTS 1 - 10 OF 6629