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June 13, 2017

EC proposed targeted reforms to amend the European Market Infrastructure Regulation (EMIR) for a more consistent and robust supervision of central counterparties (CCPs). The proposal introduces a more pan-European approach to the supervision of CCPs in EU, to ensure further supervisory convergence and accelerate certain procedures. These reforms are further expected to improve the financial stability of the EU.

The proposal ensures closer cooperation between supervisory authorities and central banks responsible for EU currencies. To this end, a newly created supervisory mechanism will be established within ESMA. For non-EU CCPs, the proposal builds on the existing third-country provisions in EMIR and will make the process to recognize and supervise third-country CCPs more rigorous, for CCPs that are of key systemic importance for the EU. The proposal introduces a new "two tier" system for classifying third-country CCPs. Non-systemically important CCPs will continue to be able to operate under the existing EMIR equivalence framework. However, systemically important CCPs (that is, Tier 2 CCPs) will be subject to stricter requirements. Depending on the significance of the third-country CCP's activities for the EU and member states' financial stability, a limited number of CCPs may be of such systemic importance that the requirements are deemed insufficient to mitigate the potential risks. In such instances, the EC, on request by ESMA and in agreement with the relevant central bank, can decide that a CCP will only be able to provide services in the Union if it establishes itself in the EU.

This proposal is a timely overhaul of the supervisory arrangements for CCPs established by EMIR. It complements the proposed amendments to EMIR and the EC proposal for CCP recovery and resolution. It is based on an assessment of the supervisory arrangements for CCPs and on feedback from a series of public consultations, notably on the operations of the ESAs and on the Capital Markets Union Mid-Term Review. It also considers feedback received following the publication of the EC's Communication responding to challenges for critical financial market infrastructures. At a Supervisory College meeting on the release of this proposal, the EC Vice President Valdis Dombrovskis said: “This proposal will have costs and benefits, and we have assessed them thoroughly in our impact assessment. We have calibrated our proposal to minimize the impact for businesses. The benefit is that we will maintain financial stability in the face of major challenges. This is in the interest of our citizens and the economy as a whole.”

Related Links

EC Proposal (PDF)

Speech of EC Vice President

EMIR Review

Keywords: Europe, EC, Securities, ESMA, FMI, CCPs, EMIR, Supervisory Convergence


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