ESMA issued the results of a peer review it conducted into how national competent authorities ensure that central counterparties (CCPs) comply with requirements under the European Markets Infrastructure Regulation (EMIR). The peer review covered the supervision—by national competent authorities—of CCPs’ default management procedures (DMPs), including how they simulate the default of a clearing member (fire drills).
Overall, ESMA found that the national competent authorities supervise DMPs adequately and that most EU CCPs have performed fire drills. However, the report also highlights the areas where divergences emerged with respect to national competent authorities’ supervisory approaches related to reviewing and testing of DMP and fire drills. It also identifies areas where supervisory convergence could be further enhanced, in addition to highlighting the existing good practices. A possible case of non-compliance with EMIR was also identified in the area of the frequency of fire drills, which will require further follow-up.
ESMA compared the supervisory approaches of the national competent authorities supervising the 17 CCPs established in EU at the time of the launch of the review on April 01, 2017. The ESMA review focused on assessing whether the supervisory practices put in place by national competent authorities to assess the compliance of the CCPs’ DMPs, are effective. However, ESMA found that not all national competent authorities do systematically review their respective CCPs’ DMP tests and fire drills.
Keywords: Europe, EU, Securities, EMIR, CCPs, DMPs, Peer Review, ESMA
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