Recovery and resolution of central counterparties (CCPs)

25-04-2018

In recent years, the role and systemic importance of central counterparties (CCPs) has expanded with the gradual implementation of the obligation to centrally clear liquid and standardised over-the-counter (OTC) derivatives. The relevant EU regulatory framework lays down prudential requirements for CCPs, as well as requirements regarding their operation, oversight and risk management. No harmonised EU rules, however, exist for the unlikely situations in which these standards prove insufficient to address major financial or operational difficulties that CCPs may incur or their outright failure. The international standard-setting organisations have developed standards for the recovery and resolution of financial market infrastructures, including CCPs. In a 2013 own-initiative resolution, the Parliament called on the Commission to prioritise the recovery and resolution of CCPs and reiterated this request in a 2015 resolution on building a capital markets union. In November 2016 the European Commission adopted a proposal for a regulation requiring CCPs to prepare recovery measures and providing resolution authorities with early intervention and resolution powers. Parliament’s Committee on Economic and Monetary Affairs (ECON) adopted its report on the proposal on 24 January 2018. Second edition. The ‘EU Legislation in Progress’ briefings are updated at key stages throughout the legislative procedure.

In recent years, the role and systemic importance of central counterparties (CCPs) has expanded with the gradual implementation of the obligation to centrally clear liquid and standardised over-the-counter (OTC) derivatives. The relevant EU regulatory framework lays down prudential requirements for CCPs, as well as requirements regarding their operation, oversight and risk management. No harmonised EU rules, however, exist for the unlikely situations in which these standards prove insufficient to address major financial or operational difficulties that CCPs may incur or their outright failure. The international standard-setting organisations have developed standards for the recovery and resolution of financial market infrastructures, including CCPs. In a 2013 own-initiative resolution, the Parliament called on the Commission to prioritise the recovery and resolution of CCPs and reiterated this request in a 2015 resolution on building a capital markets union. In November 2016 the European Commission adopted a proposal for a regulation requiring CCPs to prepare recovery measures and providing resolution authorities with early intervention and resolution powers. Parliament’s Committee on Economic and Monetary Affairs (ECON) adopted its report on the proposal on 24 January 2018. Second edition. The ‘EU Legislation in Progress’ briefings are updated at key stages throughout the legislative procedure.