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June 20, 2017

Benoît Cœuré, Member of the ECB Executive Board, spoke at the Global Financial Markets Association in Frankfurt. He discussed central clearing, along with its importance and implications for financial stability in the context of Brexit.

Mr. Cœuré began his speech by highlighting the importance of central counterparties (CCPs) in reducing systemic risk and ensuring financial stability. He added that now the challenge is to ensure that CCPs themselves do not become a risk to financial stability. He detailed the role played by the existing rules, such as the CPMI-IOSCO standards for CCP risk management and European Market Infrastructure Regulation (EMIR), and the regulatory bodies in the supervision of CCPs. Next, he discussed the importance of UK CCPs for the stability of the euro, also highlighting that, as per ECB estimates, the UK CCPs clear nearly 90% of the euro-denominated interest rate swaps of euro area banks and 40% of their euro-denominated credit default swaps. Therefore, Brexit is a cause for concern in the future regulatory treatment of central clearing. He also added that the current EU regime regarding third-country CCPs was not designed to cope with major systemic CCPs operating from outside the EU. Consequently, the UK’s decision to leave the EU is prompting a significant rethink of the European approach to the supervision of systemically important global CCPs.


Most of the EC proposals in this area "merely replicate the approaches already followed by many other major jurisdictions," added Mr. Cœuré. He, however, welcomed the recent EC proposals to amend EMIR and highlighted that there has been significant focus on one aspect of the recent EC proposal—that is, the ability of the EC to deny recognition to a CCP that poses excessive risks to the financial stability of the EU and to require it to establish itself in the EU if it wishes to provide clearing services in the EU. This would be just one of the tools available to EU authorities under the revised EMIR proposal. Ultimately, however, it will be up to the EC and the EU legislators to decide on the specific conditions for triggering such a requirement, in the context of the forthcoming legislative discussions. On its part, ECB is carefully examining the EC proposal and plans to issue an opinion on it in the coming months, said Mr. Cœuré.


Related Link: Speech

Keywords: Europe, ECB, Securities, CCP, EMIR, Financial Stability

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