EU published Regulation 2019/2099, which amends European Market Infrastructure Regulation or EMIR (648/2012) regarding the procedures and authorities involved for the authorization of central counterparties (CCPs) and requirements for the recognition of third-country CCPs. Regulation 2019/2099 shall enter into force on the twentieth day following that of its publication in the Official Journal of the European Union.
The regulation states that ESMA shall establish permanent internal committee for CCPs (CCP Supervisory Committee) to handle tasks related to CCPs authorized within the Union and third-country CCPs. The CCP Supervisory Committee shall be composed of a Chair, independent members and the competent authorities of member states with an authorized CCP. The supervisory arrangements in EMIR for third-country CCPs offering clearing services within the Union also has been revised. As part of its commitment to integrated financial markets, EC should continue to determine, by way of equivalence decisions, that the legal and supervisory frameworks of third countries fulfill the requirements of EMIR. To enhance implementation of the current equivalence regime in relation to CCPs, EC should be able to, if necessary, specify further the criteria for assessing the equivalence of third-country CCP regimes.
When considering the application of a third-country CCP for recognition, ESMA shall assess the degree of systemic risk that the CCP presents to the financial stability of the Union or of one or more of its member states on the basis of objective and transparent criteria set out in Regulation (EU) 2019/2099. CCPs that are not systemically important to the financial stability of the Union, or of one or more of its member states, shall be considered as Tier 1. CCPs that are systemically important or likely to become systemically important for the financial stability of the Union or of one or more of its member states shall be considered as Tier 2. To be recognized and authorized to operate in EU, the Tier 2 CCPs would be subject to stricter rules, including the following:
- Compliance with the necessary prudential requirements for EU-CCPs while taking into account third-country rules
- Confirmation from the relevant EU central banks that the CCP complies with any additional requirements set by those central banks
- ESMA shall conduct investigations and on-site inspections of Tier 2 CCPs and related third parties to whom those CCPs have outsourced operational functions, services, or activities.
Effective Date: January 01, 2020
Keywords: Europe, EU, Banking, Securities, CCPs, EMIR, Tier 2 CCPs, Systemic Risk, ESMA, EC, European Council, European Parliament
Sam leads the quantitative research team within the CreditEdge™ research group. In this role, he develops novel risk and forecasting solutions for financial institutions while providing thought leadership on related trends in global financial markets.
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