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    ESMA on Draft Amendments to Indices and Recognized Exchanges Under CRR

    December 11, 2019

    ESMA issued the final report on draft amendments to the Implementing Regulation (EU) 2016/1646, which specifies the main indices and recognized exchanges, under the Capital Requirements Regulation (CRR), that are relevant to credit institutions and investment firms subject to prudential requirements and trading venues. ESMA introduced these amendments to ensure that the most relevant criteria are applied to specify the main indices and that the list of recognized exchanges is updated to reflect the legislative changes and changes in market structures. ESMA has submitted the final report, including the draft implementing technical standards amending Implementing Regulation (EU) 2016/1646 to the EC, which now has three months to decide whether to endorse the proposed amendments.

    ESMA had published a consultation paper on amendments to the Implementing Regulation (EU) 2016/1646 on May 24, 2019 and had invited stakeholders to provide feedback by July 05, 2019. Post consultation, the amended technical standards provide for a new methodology to ensure that the main indices captured comprise instruments that are sufficiently liquid and can, therefore, serve as adequate eligible collateral. In addition, an amendment by ESMA will provide credit institutions and investment firms with the option to use, as eligible collateral, instruments traded on new European exchanges as well as instruments traded on third-country exchanges, from the jurisdictions for which EC has adopted equivalence decisions under Article 25(4) of the Markets in Financial Instruments Directive (MiFID) II, as now required under CRR 2.

    Due to the uncertainty about the date when UK will leave EU, ESMA has included two versions of the amended technical standards in the final report. The first version includes UK exchanges and is to be used in case there is a Brexit deal. The second version of the technical standards excludes UK exchanges and should be used in case of a no-deal outcome and in the absence of a Commission Equivalence decision in respect of the UK. Annex I to the report contains the full text of the draft technical standards under the two Brexit scenarios, Annex II includes the cost-benefit analysis of the proposal, Annex III provides the detailed feedback to the consultation paper, and Annex IV contains a brief analysis of additional indices suggested in the responses to the consultation.

     

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    Keywords: Europe, EU, Securities, Banking, CRR, Regulation 2016/1646, Recognized Exchanges, Implementing Technical Standards, Indices, ESMA

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