Legal provisions of COM(2022)697 - Amending regulations 648/2012, 575/2013, 2017/1131 to mitigate excessive exposures to third-country central counterparties and improve the efficiency of Union clearing markets - Main contents
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This page contains a limited version of this dossier in the EU Monitor.
| dossier | COM(2022)697 - Amending regulations 648/2012, 575/2013, 2017/1131 to mitigate excessive exposures to third-country central counterparties ... |
|---|---|
| document | COM(2022)697  |
| date | December 7, 2022 |
Contents
Article 1 - Amendments to Regulation (EU) No 648/2012
(1) Article 3 is replaced by the following:
‘Article 3
Intragroup transactions
1. In relation to a non-financial counterparty, an intragroup transaction shall be an OTC derivative contract entered into with another counterparty which is part of the same group provided that both counterparties are included in the same consolidation on a full basis and they are subject to an appropriate centralised risk evaluation, measurement and control procedures and that counterparty is established in the Union or, if it is established in a third country that third country is not listed pursuant to paragraphs 4 and 5.
2. In relation to a financial counterparty, an intragroup transaction shall be any of the following:
(a)an OTC derivative contract entered into with another counterparty which is part of the same group, provided that all of the following conditions are met:
(a)the financial counterparty is established in the Union or, if it is established in a third country, that third country is not listed pursuant to paragraphs 4 and 5;
(b)the other counterparty is a financial counterparty, a financial holding company, a financial institution or an ancillary services undertaking subject to appropriate prudential requirements;
(c)both counterparties are included in the same consolidation on a full basis;
(d)both counterparties are subject to appropriate centralised risk evaluation, measurement and control procedures;
(b)an OTC derivative contract entered into with another counterparty where both counterparties are part of the same institutional protection scheme, referred to in Article 113(7) of Regulation (EU) No 575/2013, provided that the condition set out in point (a)(ii) of this paragraph is met;
(c)an OTC derivative contract entered into between credit institutions affiliated to the same central body or between such credit institution and the central body, as referred to in Article 10(1) of Regulation (EU) No 575/2013;
(d)an OTC derivative contract entered into with a non-financial counterparty which is part of the same group, provided both the following conditions are met:
(a)both counterparties to the derivative contract are included in the same consolidation on a full basis and are subject to an appropriate centralised risk evaluation, measurement and appropriate control procedures;
(b) the non-financial counterparty is established in the Union or, if it is established in a third-country, that third country is not listed under paragraphs 4 and 5.
3. For the purposes of this Article, counterparties shall be considered included in the same consolidation when they are both any of the following:
(a) included in a consolidation in accordance with Directive 2013/34/EU or International Financial Reporting Standards (IFRS) adopted pursuant to Regulation (EC) No 1606/2002 or, in relation to a group the parent undertaking of which has its head office in a third country, in accordance with generally accepted accounting principles of a third country determined to be equivalent to IFRS in accordance with Regulation (EC) No 1569/2007 or accounting standards of a third country the use of which is permitted in accordance with Article 4 of that Regulation;
(b) covered by the same consolidated supervision in accordance with Directive 2013/36/EU or, in relation to a group the parent undertaking of which has its head office in a third country, the same consolidated supervision by a third-country competent authority verified as equivalent to that governed by the principles laid down in Article 127 of Directive 2013/36/EU.
4. For the purposes of this Article, transactions with counterparties established in any of the following third countries shall not benefit from any of the exemptions for intragroup transactions:
(a) where the third country is listed as a high-risk third country that has strategic deficiencies in its regime on anti-money laundering and counter terrorist financing, in accordance with Article 9 of Directive (EU) 2015/849 of the European Parliament and of the Council*1;
(b) where the third country is listed in Annex I to the Council conclusions on the revised EU list of non-cooperative jurisdictions for tax purposes*2 and their subsequent updates which are specifically approved twice a year, customarily in February and October, and published in series C of the Official Journal of the European Union.
5. Where appropriate in the light of the legal, supervisory and enforcement arrangements of a third country with regard to risks, including counterparty credit risk and legal risk, the Commission is empowered to adopt delegated acts in accordance with Article 82 to supplement this Regulation to identify the third countries whose entities may not benefit from any of the exemptions for intragroup transactions despite not being listed pursuant to paragraph 4.
___________________________________________________
*1 Directive (EU) 2015/849 of the European Parliament and of the Council of 20 May 2015 on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing, amending Regulation (EU) No 648/2012 of the European Parliament and of the Council, and repealing Directive 2005/60/EC of the European Parliament and of the Council and Commission Directive 2006/70/EC (OJ L 141, 5.6.2015, p. 73).’
*2 Council conclusions on the revised EU list of non-cooperative jurisdictions for tax purposes and the Annexes thereto (OJ C 413 I, 12.10.2021, p. 1).;
(2) in Article 4(1), the following subparagraph is added:
‘The obligation to clear all OTC derivative contracts does not apply to contracts concluded in situations as referred to in the first subparagraph, point (a)(iv), between, on one side, a financial counterparty that meets the conditions set out in Article 4a(1), second subparagraph, or a non-financial counterparty that meets the conditions set out in Article 10(1), second subparagraph, and, on the other side, a pension scheme arrangement established in a third country and operating on a national basis, provided that such entity or arrangement is authorised, supervised and recognised under national law and where its primary purpose is to provide retirement benefits and is exempted from the clearing obligation under its national law.’;
(3) in Article 4a(3), the first subparagraph is replaced by the following:
‘In calculating the positions referred to in paragraph 1, the financial counterparty shall include all OTC derivative contracts that are not cleared in a CCP authorised under Article 14 or recognised under Article 25, entered into by that financial counterparty or entered into by other entities within the group to which that financial counterparty belongs.’;
(4) the following Articles 7a and 7b are inserted:
‘Article 7a
Active Account
1. Financial counterparties or a non-financial counterparties that are subject to the clearing obligation in accordance with Articles 4a and 10 and clear any of the categories of the derivative contracts referred to in paragraph 2 shall clear at least a proportion of such contracts at accounts at CCPs authorised under Article 14.
2. The categories of derivative contracts subject to the obligation referred to in paragraph 1 shall be any of the following:
(a) interest rate derivatives denominated in euro and Polish zloty;
(b) Credit Default Swaps (CDS) denominated in euro;
(c) Short-Term Interest Rate Derivatives (STIR) denominated in euro.
3. A financial counterparty or a non-financial counterparty that is subject to the obligation set out in paragraph 1 shall calculate its activities in the categories of derivative contracts referred to in paragraph 1 at CCPs authorised under Article 14.
4. A financial counterparty or a non-financial counterparty that is subject to the obligation set out in paragraph 1 shall report to the competent authority of the CCP or CCPs it uses the outcome of the calculation referred to in paragraph 2 on an annual basis, confirming their compliance with the obligation set out in that paragraph. The CCP’s competent authority shall immediately transmit that information to ESMA and the Joint Monitoring Mechanism referred to in Article 23c.
5. ESMA shall, in cooperation with the EBA, EIOPA and ESRB and after consulting the ESCB, develop draft regulatory technical standards specifying:
(a) the proportion of activity in each category of the derivative contracts referred to in paragraph 2; that proportion shall be set at a level that results in a reduction in clearing in those derivative contracts at those Tier 2 CCPs offering services of substantial systemic importance for the financial stability of the Union or one or more of its Member States pursuant to Article 25(2c) and that ensures clearing in such derivative contracts is no longer of substantial systemic importance;
(b) the methodology for calculation under paragraph 3.
ESMA shall submit those draft regulatory technical standards to the Commission by … [PO: please insert the date = 12 months after the date of entry into force of this Regulation].
Power is delegated to the Commission to adopt the regulatory technical standards referred to in the first subparagraph in accordance with Articles 10 to 14 of Regulation (EU) No 1095/2010.
6. Where ESMA undertakes an assessment pursuant to Article 25(2c) and concludes that certain services or activities provided by Tier 2 CCPs are of substantial systemic importance for the Union or one or more of its Member States or that services or activities that were previously identified by ESMA as being of substantial systemic importance for the Union or one or more of its Member States no longer are, the Commission is empowered to adopt a delegated act to amend paragraph 2 accordingly, in accordance with Article 82.
Article 7 - b Information on clearing services
1. Clearing members and clients that provide clearing services both at a CCP authorised under Article 14 and at a CCP recognised under Article 25 shall, when one of their clients submits a contract for clearing, inform that client about the possibility to clear such contract at the CCP authorised under Article 14.2. Clearing members and clients that are established in the Union or are part of a group subject to consolidated supervision in the Union and that clear in a CCP recognised under Article 25, shall report to their competent authority the scope of their clearing activity in such CCP on an annual basis, specifying all of the following:
(a) the type of financial instruments or non-financial contracts cleared;
(b) the average values cleared over 1 year per Union currency and per asset class;
(c) the amount of margins collected;
(d) the default fund contributions
(e) the largest payment obligation.
That competent authority shall promptly transmit that information to ESMA and the Joint Monitoring Mechanism referred to in Article 23c.
3. ESMA shall, in cooperation with the EBA, EIOPA and ESRB and after consulting the ESCB, develop draft regulatory technical standards further specifying the content of the information to be reported and the level of detail of the information to be provided in accordance with paragraph 2, taking into account which information is already available to ESMA under the existing reporting framework.
ESMA shall submit those draft regulatory technical standards to the Commission by … [PO: please insert the date = 12 months after the date of entry into force of this Regulation].
Power is delegated to the Commission to adopt the regulatory technical standards referred to in the first subparagraph in accordance with Articles 10 to 14 of Regulation (EU) No 1095/2010.
4. ESMA shall develop draft implementing technical standards specifying the format of the information to be submitted to the competent authority referred to in paragraph 2.
ESMA shall submit those draft implementing technical standards to the Commission by … [PO: please insert the date = 12 months after the date of entry into force of this Regulation].
Power is conferred on the Commission to adopt the implementing technical standards referred to in the first subparagraph in accordance with Article 15 of Regulation (EU) No 1095/2010.’;
(5) Article 9 is amended as follows:
(a) in paragraph 1, the third and fourth subparagraphs are deleted;
(b) in paragraph 1a, fourth subparagraph,
- point (a) is replaced by the following:
“(a) that third country entity would be qualified as a financial counterparty if it were established in the Union; and”
- point (b) is deleted.
(6) in Article 10, paragraphs 2a to 5 are replaced by the following:
‘2a. The relevant competent authorities of the non-financial counterparty and of the other entities within the group shall establish cooperation procedures to ensure the effective calculation of the positions and evaluate and assess the level of exposure in OTC derivative contracts at the group level.
3. In calculating the positions referred to in paragraph 1, the non-financial counterparty shall include all the OTC derivative contracts that are not cleared in a CCP authorised under Article 14 or recognised under Article 25 entered into by the non-financial counterparty which are not objectively measurable as reducing risks directly relating to the commercial activity or treasury financing activity of the non-financial counterparty.
4. ESMA shall develop draft regulatory technical standards, after having consulted the ESRB and other relevant authorities, specifying all of the following:
(a) criteria for establishing which OTC derivative contracts are objectively measurable as reducing risks directly relating to the commercial activity or treasury financing activity referred to in paragraph 3;
(b) values of the clearing thresholds, which are determined taking into account the systemic relevance of the open positions and future net exposures per counterparty and per class of OTC derivatives;
(c) the mechanisms triggering a review of the values of the clearing thresholds following significant price fluctuations in the underlying class of OTC derivatives.
ESMA shall submit those draft regulatory technical standards to the Commission by … [PO: please insert the date =12 months from the date of entry into force of this Regulation].
Power is delegated to the Commission to adopt the regulatory technical standards referred to in the first subparagraph in accordance with Articles 10 to 14 of Regulation (EU) No 1095/2010.
ESMA shall review, in consultation with the ESRB, the clearing thresholds referred to in the first subparagraph, point (b), taking into account, in particular, the interconnectedness of financial counterparties. That review shall be conducted at least every 2 years, and earlier where necessary or where required under the mechanism established under the first subparagraph, point (c), and may propose changes to the thresholds as specified in the first subparagraph, point (b), by the regulatory technical standards adopted pursuant to this Article. When reviewing the clearing thresholds, ESMA shall consider whether the classes of OTC derivatives, for which a clearing threshold has been set, are still the relevant classes of OTC derivatives or if new classes should be introduced.
That periodic review shall be accompanied by a report by ESMA on the subject.
5. Each Member State shall designate an authority responsible for ensuring that the obligations of non-financial counterparties under this Regulation are met. That authority shall report to ESMA at least once a year, and more frequently where an emergency situation is identified under Article 24, on the activity in OTC derivatives of the non-financial counterparties it is responsible for as well as that of the group they belong to.
At least every 2 years, ESMA shall present a report to the European Parliament, the Council and the Commission on the activities of Union non-financial counterparties in OTC derivatives, identifying areas where there is a lack of convergence and coherence in the application of this Regulation as well as potential risks to the financial stability of the Union.’;
(7) Article 11 is amended as follows:
(a) in paragraph 2, the following subparagraph is added:
‘A non-financial counterparty becoming subject for the first time to the obligations laid down in the first subparagraph shall set up the necessary arrangements to comply with those obligations within four months following the notification referred to in Article 10(1), second subparagraph, point (a). A non-financial counterparty shall be exempted from those obligations for contracts entered into during the four months following that notification.’;
(b) in paragraph 3, the following subparagraphs are added:
‘A non-financial counterparty becoming subject for the first time to the obligations laid out in the first subparagraph shall set up the necessary arrangements to comply with those obligations within four months following the notification referred to in Article 10(1), second subparagraph, point (a). A non-financial counterparty shall be exempted from those obligations for contracts entered into during the four months following that notification.
EBA may issue guidelines or recommendations with a view to ensure a uniform application of the risk-management procedures referred to in the first subparagraph, in accordance with the procedure laid down in Article 16 of Regulation (EU) No 1095/2010.
EBA shall develop drafts of those guidelines or recommendations in cooperation with the ESAs.’;
(c) in paragraph 15, first subparagraph, point (aa) is deleted.
(8) Article 13 is deleted;
(9) Article 14 is amended as follows:
(a) paragraph 3 is replaced by the following:
‘3. The authorisation referred to in paragraph 1 shall be granted for activities linked to clearing and shall specify the services or activities which the CCP is authorised to provide or perform including the classes of financial instruments covered by such authorisation.
An entity applying for authorisation as a CCP to clear financial instruments shall include in its application, in addition to the classes of financial instrument it applies to clear, the classes of non-financial instruments suitable for clearing that such CCP intends to clear.
Where a CCP authorised pursuant to this Article intends to clear classes of non-financial instruments suitable for clearing, it shall apply for an extension of its authorisation pursuant to Article 15.’;
(b) the following paragraphs 6 and 7 are added:
‘6. To ensure the consistent application of this Article, ESMA shall, in close cooperation with the ESCB, develop draft regulatory technical standards specifying the list of required documents that shall accompany an application for authorisation pursuant to paragraph 1 and specifying the information that such documents shall contain with a view to demonstrating that the CCP complies with all relevant requirements of this Regulation.
ESMA shall submit those draft regulatory technical standards to the Commission by … [PO: please insert the date =12 months after the date of entry into force of this Regulation]
Power is delegated to the Commission to adopt the regulatory technical standards referred to in the first subparagraph in accordance with Articles 10 to 14 of Regulation (EU) No 1095/2010.
7. ESMA shall develop draft implementing technical standards specifying the electronic format of the application to be submitted to the central database for authorisation referred to in paragraph 1.
ESMA shall submit those draft implementing technical standards to the Commission by … [PO: please insert the date = 12 months after the date of entry into force of this Regulation].
Power is conferred on the Commission to adopt the implementing technical standards referred to in the first subparagraph in accordance with Article 15 of Regulation (EU) No 1095/2010.’;
(10) Article 15 is amended as follows:
(a) paragraph 1 is replaced by the following:
‘1. A CCP wishing to extend its business to additional services or activities not covered by the existing authorisation shall submit a request for extension to the CCP’s competent authority. The offering of clearing services or activities for which the CCP has not already been authorised shall be considered to be an extension of that authorisation.
The extension of authorisation shall be made in accordance with either of the following:
(a)the procedure set out in Article 17;
(b)the procedure set out in Article 17a where the applicant CCP so requests pursuant to Article 17a(3).’;
(b) paragraph 3 is replaced by the following:
‘3. ESMA shall, in close cooperation with the ESCB, develop draft regulatory technical standards specifying the list of required documents that shall accompany an application for an extension of authorisation pursuant to paragraph 1 and specifying the information such documents shall contain with a view to demonstrating that the CCP meets all relevant requirements of this Regulation.
ESMA shall submit those draft regulatory technical standards to the Commission by … [PO: please insert the date = 12 months after the date of entry into force of this Regulation].
Power is delegated to the Commission to adopt the regulatory technical standards referred to in the first subparagraph in accordance with Articles 10 to 14 of Regulation (EU) No 1095/2010.’;
(c) the following paragraph 4 is added:
‘4. ESMA shall develop draft implementing technical standards specifying the electronic format of the application to be submitted to the central database for an extension of the authorisation referred to in paragraph 1.
ESMA shall submit those draft implementing technical standards to the Commission by … [PO: please insert the date = 12 months after the date of entry into force of this Regulation].
Power is conferred on the Commission to adopt the implementing technical standards referred to in the first subparagraph in accordance with Article 15 of Regulation (EU) No 1095/2010.’;
(11) Article 17 is amended as follows:
(a) the title of the Article is replaced by the following:
‘Procedure for granting and refusing an application for authorisation or for an extension of authorisation’
(b) paragraphs 1, 2 and 3 are replaced by the following:
‘1. The applicant CCP shall submit an application for authorisation as referred to in Article 14(1) or an application for an extension of its authorisation as referred to in Article 15(1) in an electronic format via the central database referred to in paragraph 7. The application shall be immediately shared with the CCP’s competent authority, ESMA and the college referred to in Article 18(1).
The CCP’s competent authority shall, within 2 working days after such application has been received, acknowledge receipt of the application, stating to the CCP whether it contains the documents required pursuant to Article 14(6) and (7) or, where the CCP has applied for an extension of its authorisation, pursuant to Article 15(3) and (4).
Where the CCP’s competent authority determines that not all documents required pursuant to Article 14(6) and (7) or Article 15(3) and (4) have been submitted, it shall reject the CCP’s application.
2. The applicant CCP shall provide all information necessary to demonstrate that it has established, at the time of authorisation, all the necessary arrangements to meet the requirements laid down in this Regulation.
3. Within 40 working days of the end of the period set out in the second subparagraph of paragraph 1 (“the risk assessment period”), the CCP’s competent authority, ESMA and the college shall each conduct risk assessments of the CCP’s compliance with the relevant requirements laid down in this Regulation. By the end of the risk assessment period:
(a)the CCP’s competent authority shall transmit its draft decision and report to ESMA and the college;
(b)ESMA shall adopt an opinion in accordance with Article 24a(7) and transmit it to the CCP’s competent authority and the college;;
(c)the college shall adopt an opinion pursuant to Article 19 and transmit it to the CCP’s competent authority and ESMA.
For the purposes of point (b), ESMA may include in its opinion any conditions or recommendations it considers necessary to mitigate any shortcomings in the CCP's risk management, in particular in relation to identified cross-border risks or risks to the financial stability of the Union.
For the purposes of point (c), the college may include in its opinion any conditions or recommendations it considers necessary to mitigate any shortcomings in the CCP's risk management.’;
(d) the following paragraphs 3a and 3b are inserted:
‘3a. During the risk assessment period referred to in paragraph 3, the CCP’s competent authority, ESMA or any of the college members may submit questions directly to the CCP. Where the CCP does not respond to such questions within the time period set by the requesting authority, the CCP’s competent authority, ESMA or the college may take a decision in the absence of the CCP’s response or may decide to extend the assessment period by a maximum of 10 working days, if, in their view, the question is material for the assessment.
3b. Within 10 working days of receipt of both the ESMA opinion and the college opinion, the CCP’s competent authority shall adopt its decision and transmit it to ESMA and the college.
Where the CCP’s competent authority does not agree with an opinion of ESMA or the college, including any conditions or recommendations contained therein, its decision shall contain full reasons and an explanation of any significant deviation from that opinion or conditions or recommendations.
ESMA shall publish the fact that a competent authority does not comply or does not intend to comply with its opinion or the opinion of the college or with any conditions or recommendations included therein. ESMA may also decide, on a case by case basis, to publish the reasons provided by the competent authority for not complying with the ESMA opinion or the college opinion or any conditions or recommendations contained therein.’;
(e) paragraph 4 is replaced by the following:
‘4. The CCP’s competent authority shall, after duly considering the opinions of ESMA and the college referred to in paragraph 3, including any conditions or recommendations contained therein, grant authorisation as referred to in Articles 14 and Article 15(1), second subparagraph, point (a), only where it is fully satisfied that the applicant CCP:
(a)complies with all the requirements laid down in this Regulation including, where applicable, for the provision of clearing services or activities for non-financial instruments; and
(b)is notified as a system pursuant to Directive 98/26/EC.
The CCP shall not be authorised where all the members of the college, excluding the authorities of the Member State where the CCP is established, reach a joint opinion by mutual agreement, pursuant to Article 19(1), that the CCP not be authorised. That opinion shall state in writing the full and detailed reasons why the college considers that the requirements laid down in this Regulation or other Union law are not met.
Where a joint opinion by mutual agreement as referred to in the second subparagraph has not been reached and a majority of two-thirds of the college have expressed a negative opinion, any of the competent authorities concerned, based on that majority of two-thirds of the college, may, within 30 calendar days of the adoption of that negative opinion, refer the matter to ESMA in accordance with Article 19 of Regulation (EU) No 1095/2010.
The referral decision shall state in writing the full and detailed reasons why the relevant members of the college consider that the requirements laid down in this Regulation or other parts of Union law are not met. In that case the CCP’s competent authority shall defer its decision on authorisation and await any decision on authorisation that ESMA may take in accordance with Article 19(3) of Regulation (EU) No 1095/2010. The competent authority shall take its decision in conformity with ESMA’s decision. The matter shall not be referred to ESMA after the end of the 30-day period referred to in the third subparagraph.
Where all the members of the college, excluding the authorities of the Member State where the CCP is established, reach a joint opinion by mutual agreement, pursuant to Article 19(1), that the CCP not be authorised, the CCP’s competent authority may refer the matter to ESMA in accordance with Article 19 of Regulation (EU) No 1095/2010.
The competent authority of the Member State where the CCP is established shall transmit the decision to the other competent authorities concerned.’;
(f) paragraph 7 is replaced by the following:
‘7. ESMA shall maintain a central database providing access to the CCP’s competent authority, ESMA, and the members of the college for that CCP (‘registered recipients’), to all documents registered within the database for that CCP. The CCP shall submit the application referred to in Article 14, Article 15(1), second subparagraph, point (a), and Article 49 via that database.
The registered recipients shall upload promptly all documents they receive from the CCP in relation to an application pursuant to paragraph 1 and the central database shall automatically inform the registered recipients when changes have been made to its content. The central database shall contain all documents provided by an applicant CCP under paragraph 1 and all other documents relevant for the assessment by the CCP’s competent authority, ESMA and the college.
Members of the CCP Supervisory Committee shall also have access to the central database for the performance of their tasks pursuant to Article 24a(7). The Chair of the CCP Supervisory Committee may limit access to some of the documents for the members of the CCP Supervisory Committee referred to in Article 24a, points (c) and (d)(ii), where justified based on confidentiality concerns.’;
(12) the following Articles 17a and 17b are inserted:
‘Article 17a
Non-objection procedure for granting a request for extension of activities or services
1. The non-objection procedure shall apply to non-material changes to a CCP’s existing authorisation in any of the following cases where the proposed additional clearing service or activity:
(a) fulfils all of the following the conditions:
(i) the CCP intends to clear one or more financial instruments belonging to the same classes of financial instruments for which it has been authorised to clear under Articles 14 or 15;
(ii) the financial instruments referred to in point (i) are traded on a trading venue for which the CCP already provides clearing services or performs activities; and
(iii) the proposed additional clearing service or activity does not involve a payment in a new currency;
(b) adds a new Union currency in a class of financial instruments already covered by the CCP’s authorisation; or
(c) adds one or more additional tenors to a class of financial instruments already covered by the CCP’s authorisation provided that the maturity range is not significantly extended.
2. The CCP’s competent authority may, after considering the input of the joint supervisory team set up for that CCP pursuant to Article 23b, also decide to apply the non-objection procedure of this Article where a CCP so requests and where the proposed additional clearing service or activity does not fulfil any of the following conditions:
(a)it results in the CCP needing to adapt significantly its operational structure, at any point in the contract cycle:
(b)it includes offering contracts that cannot be liquidated in the same manner, such as via direct offer or auction, or together with contracts already cleared by the CCP;
(c)it results in the CCP needing to take into account material new contract specifications, such as significant extensions of the ranges of maturities or a new option exercise styles within a category of contracts;
(d)it results in the introduction of material new risks, linked to the different characteristics of the assets referenced;
(e)it includes offering a new settlement or delivery mechanism or service which involves establishing links with a different securities settlement system, CSD or payment system which the CCP did not previously use.
3. A CCP that submits a request for extension requesting that the non-objection procedure be applied, shall demonstrate why the proposed extension of its business to additional clearing services or activities qualifies under paragraphs 1 or 2 to be assessed under the non-objection procedure. The CCP shall submit its application in an electronic format via the central database referred to in Article 17(7) and shall provide all information necessary to demonstrate that it has established, at the time of authorisation, all the necessary arrangements to meet the relevant requirements laid down in this Regulation.
A CCP that applies for an extension of its authorisation requesting that the non-objection procedure be applied and the proposed additional clearing services or activities fall within the scope of paragraph 1, may start clearing such additional financial instruments or non-financial instruments suitable for clearing before the decision of the CCP’s competent authority pursuant to paragraph 4.
4. Within 10 working days of receipt of an application pursuant to paragraph 2, the CCP’s competent authority shall, after considering the input of the joint supervisory team set up for that CCP pursuant to Article 23b, decide whether the application shall be subject to the non-objection procedure set out in this Article or, if the CCP’s competent authority has identified material risks as a result of the proposed extension of the CCP’s business to additional clearing services or activities, that the procedure set out in Article 17 shall apply. The CCP’s competent authority shall notify the applicant CCP of its decision. Where the CCP’s competent authority has decided that the procedure set out in Article 17 shall apply, the CCP shall, within 5 working days after receipt of such notification, cease providing such clearing service or activity.
5. Where a CCP’s competent authority, after considering the input of the joint supervisory team set up for that CCP pursuant to Article 23b, has not expressed its objection to the CCP’s proposed additional services or activities within 10 working days of receipt of the application where paragraph 1 applies or of receipt of the notification referred to in paragraph 4, where that paragraph applies, confirming that the non-objection procedure set out in this Article applies, the authorisation shall be deemed as granted.
6. The Commission is empowered to adopt delegated acts in accordance with Article 82 to supplement this Regulation by specifying any changes to the list of non-material changes listed under paragraph 1, where such a change would not bring an increased risk to the CCP.
Article 17 - b Procedure for seeking the opinion from ESMA and the college
1. A CCP’s competent authority shall submit in electronic format via the central database referred to in Article 17(7) a request for an opinion:(a)by ESMA pursuant to Article 23a(2), where the competent authority intends to adopt a decision in relation to Articles 7, 8, 20, 21, 29, 30, 31, 32, 33, 35, 36, 41 and 54;
(b)by the college pursuant to Article 18, where the competent authority intends to adopt a decision in relation to Article 20, 21, 30, 31, 32, 35, 41, 49, 51 and 54.
That request for an opinion shall be shared immediately with the registered recipients.
2. Unless otherwise specified under the relevant Article, ESMA and the college shall, within 30 working days of receipt of the request referred to in paragraph 1 (‘the assessment period’), assess the CCP’s compliance with the respective requirements. By the end of the assessment period:
(a) the CCP’s competent authority shall transmit its draft decision and report to ESMA and the college;
(b) ESMA shall adopt an opinion in accordance with Article 24a(7), first subparagraph, point (bc), and transmit it to the CCP’s competent authority and the college. ESMA may include in its opinion any conditions or recommendations it considers necessary to mitigate any shortcomings in the CCP's risk management, in particular in relation to identified cross-border risks or risks to the financial stability of the Union;
(c) the college shall adopt an opinion pursuant to Article 19 and transmit it to ESMA and the CCP’s competent authority. The college opinion may include conditions or recommendations it considers necessary to mitigate any shortcomings in the CCP's risk management.
3. Within 10 working days of receipt of the ESMA opinion and, where required, the college opinion, the CCP’s competent authority shall, after duly considering the opinions of ESMA and the college, including any conditions or recommendations contained therein, adopt its decision and transmit it to ESMA and the college.
Where the CCP’s competent authority does not agree with an opinion of ESMA or the college, including any conditions or recommendations contained therein, its decision shall contain full reasons and an explanation of any significant deviation from that opinion or conditions or recommendations.
ESMA shall publish the fact that a competent authority does not comply or does not intend to comply with its opinion or the opinion of the college or with any conditions or recommendations included therein. ESMA may also decide, on a case by case basis, to publish the reasons provided by the competent authority for not complying with the ESMA opinion or the college opinion or any conditions or recommendations contained therein.’;
(13) Article 18 is amended as follows:
(a) paragraph 1 is replaced by the following:
‘1. Within 30 calendar days of the submission of a complete application in accordance with Article 17, the CCP's competent authority shall establish a college to facilitate the exercise of the tasks referred to in Articles 15, 17 , 20, 21, 30, 31, 32, 35, 41, 49, 51 and 54.’;
(b) in paragraph 2, point (a) is replaced by the following:
‘(a) the Chair or any of the independent members of the CCP Supervisory Committee referred to in Article 24a(2), points (a) and (b), who shall manage and chair the college;’;
(14) Article 19 is amended as follows:
(a) paragraph 1 is replaced by the following:
‘1. Where the college is required to give an opinion pursuant to this Regulation, it shall reach a joint opinion determining whether the CCP complies with all the requirements laid down in this Regulation.
Without prejudice to Article 17(4), third subparagraph, and if no joint opinion is reached in accordance with the first subparagraph, the college shall adopt a majority opinion within the same period.’;
(b) in paragraph 3, the fourth subparagraph is replaced by the following:
‘The members of the college referred to in Article 18(2), points (ca) and (i), shall have no voting rights on the opinions of the college.’;
(c) paragraph 4 is deleted;
(15) in Article 20, paragraphs 3 to 7 are replaced by the following:
‘3. The CCP’s competent authority shall consult ESMA and the members of the college, in accordance with paragraph 6, on the necessity to withdraw the authorisation of the CCP, except where a decision is required urgently.
4. ESMA or any member of the college may, at any time, request that the CCP’s competent authority examine whether the CCP remains in compliance with the conditions under which authorisation was granted.
5. The CCP’s competent authority may limit the withdrawal to a particular service, activity, or class of financial instruments or non-financial instruments.
6. Before the CCP’s competent authority takes a decision to withdraw a particular service, activity, or class of financial instruments or non-financial instruments, it shall request the opinions of ESMA and the college in accordance with Article 17b.
7. Where a CCP’s competent authority takes a decision on the withdrawal of authorisation in full or in relation to a particular service, activity, or class of financial instruments or non-financial instruments, that decision shall take effect throughout the Union.’;
(16) Article 21 is amended as follows:
(a) paragraph 1 is replaced by the following:
‘1. The competent authorities referred to in Article 22 shall do all of the following:
(a) review the arrangements, strategies, processes and mechanisms implemented by CCPs to comply with this Regulation;
(b) review the services or activities the CCP has started providing following the non-objection procedures pursuant to Article 17a or pursuant to Article 49;
(c) evaluate the risks, including financial and operational risks, to which CCPs are, or might be, exposed.’;
(b) paragraphs 3 and 4 are replaced by the following:
‘3. The competent authorities shall, after having considered the input of the joint supervisory team set up for that CCP pursuant to Article 23b, establish the frequency and depth of the review and evaluation referred to in paragraph 1 of this Article, having particular regard to the size, systemic importance, nature, scale, complexity of the activities and interconnectedness with other financial market infrastructures of the CCPs concerned and to the supervisory priorities established by ESMA in accordance with Article 24a(7), first subparagraph, point (ba). The competent authorities shall update the review and evaluation at least on an annual basis.
CCPs shall be subject to on-site inspections. Competent authorities shall invite the members of the joint supervisory team set up for that CCP pursuant to Article 23b, to participate in on-site inspections.
The competent authority shall forward to the members of the joint supervisory team set up for that CCP pursuant to Article 23b any information received from the CCPs during or in relation to on-site inspections.
4 The competent authorities shall regularly, and at least annually, submit a report to the college on the results of the review and evaluation as referred to in paragraph 1, including whether the competent authority has taken any remedial action or imposed penalties. The competent authorities shall communicate the report covering a calendar year to ESMA by 30 March of the following calendar year. That report shall be subject to an opinion of the college pursuant to Article 19 and an opinion by ESMA pursuant to Article 24a(7), first subparagraph, point (bc), issued in accordance with the procedure set out in Article 17b.’;
(17) Article 23a is amended as follows:
(a) paragraphs 1 and 2 are replaced by the following:
‘1. ESMA shall fulfil a coordination role between competent authorities and across colleges to:
(a) build a common supervisory culture and consistent supervisory practices;
(b) ensure uniform procedures and consistent approaches;
(c) strengthen consistency in supervisory outcomes, in particular with regard to supervisory areas which have a cross-border dimension or a possible cross-border impact;
(d) strength coordination in emergency situations in accordance with Article 24;
(e) assess risks when providing opinions to competent authorities pursuant to paragraph 2 on CCPs’ compliance with the requirements of this Regulation, in particular in relation to identified cross-border risks or risks to the financial stability of the Union, and providing recommendations as to how a CCP shall mitigate those risks.
2. Competent authorities shall submit their draft decisions to ESMA for its opinion before adopting any act or measure pursuant to Articles 7, 8 and 14, Article 15(1), second subparagraph, point (a) and Articles 20 and 21, Articles 29 to 33, and Articles 35, 36, 41, and 54.
Competent authorities may also submit draft decisions to ESMA for its opinion before adopting any other act or measure in accordance with their duties under Article 22(1).’;
(b) paragraphs 3 and 4 are deleted;
(18) the following Articles 23b and 23c are inserted:
‘Article 23b
Joint Supervisory Teams
1. A joint supervisory team shall be established for the supervision of each CCP authorised under Article 14. Each joint supervisory team shall be composed of staff members from the CCP’s competent authority, ESMA and the members of the college referred to in Article 18, points (c), (g) and (h). Other members of the college may also request to participate in the joint supervisory team. Joint supervisory teams shall work under the coordination of a designated competent authority staff member.
2. The tasks of a joint supervisory team shall include, but are not limited to, all of the following:
(a) provide input to the competent authorities, ESMA and the colleges pursuant to Article 17a (2), (4) and (5)and Article 21(3);
(b) participate to on-site inspections pursuant to Article 21(3);
(c) liaise with competent authorities and members of the college, where relevant;
(d) where a CCP’s competent authority so requests, provide assistance to that competent authority in assessing the CCP’s compliance with the requirements of this Regulation.
3. The CCP’s competent authority shall be in charge of the establishment of joint supervisory teams.
4. ESMA and authorities participating to the joint supervisory teams shall consult each other and agree on the use of resources with regard to the joint supervisory teams.
Article 23 - c Joint Monitoring Mechanism
1. ESMA shall establish a Joint Monitoring Mechanism for the exercise of the tasks referred to in paragraph 2.The Joint Monitoring Mechanism shall be composed of:
(a) representatives of ESMA;
(b) representatives of EBA and EIOPA;
(c) representatives of the Commission, the ESRB, the ECB and the ECB in the framework of the tasks concerning the prudential supervision of credit institutions within the single supervisory mechanism conferred upon it in accordance Council Regulation (EU) No 1024/2013.
ESMA shall manage and chair the meetings of the Joint Monitoring Mechanism. The Chair of the Joint Monitoring Mechanism, upon request of the other members of the Joint Monitoring Mechanism or on his own initiative, may invite other authorities to participate in the meetings when relevant to the topics to be discussed.
2. The Joint Monitoring Mechanism shall:
(a) monitor the implementation of the requirements set out in Articles 7a and 7b, including all of the following:
(i) the overall exposures and reduction of exposures to substantially systemically important clearing services identified pursuant to Article 25(2c);
(ii) developments related to clearing in CCPs authorised under Article 14 and access to clearing by clients to such CCPs, including fees charged by such CCPs for establishing accounts pursuant to Article 7a and any fees charged by clearing members to their clients for establishing accounts and undertaking clearing pursuant to Article 7a;
(iii) other significant developments in clearing practices having an impact on the level of clearing at CCPs authorised under Article 14;
(b) monitor client clearing relationships, including portability and clearing members and clients’ interdependencies and interactions with other financial market infrastructures;
(c) contribute to the development of Union-wide assessments of the resilience of CCPs focussing on liquidity risks concerning CCPs, clearing members and clients;
(d) identify concentration risks, in particular in client clearing, due to the integration of Union financial markets, including where several CCPs, clearing members or clients use the same service providers;
(e) monitor the effectiveness of the measures aimed at improving the attractiveness of Union CCPs, encouraging clearing at Union CCPs and enhancing the monitoring of cross-border risks.
The bodies participating in the Joint Monitoring Mechanism and national competent authorities shall cooperate and share the information necessary to carry out the monitoring activities referred to in the first subparagraph.
Where the required information is not made available, including information referred to in Article 7a(4), ESMA may, by simple request, require authorised CCPs, their clearing members and their clients to provide the necessary information enabling ESMA and the other bodies participating to Joint Monitoring Mechanism to perform the assessment referred to in the first subparagraph.
3. ESMA shall, in cooperation with the other bodies participating to the Joint Monitoring Mechanism, submit an annual report to the European Parliament, the Council and the Commission on the results of its activities pursuant to paragraph 2.
4. ESMA shall act in accordance with Article 17 of Regulation (EU) No 1095/2010 where, on the basis of the information received as part of the Joint Monitoring Mechanism and following the discussions held therein:
(a) it considers that competent authorities fail to ensure clearing members’ and clients’ compliance with the requirement set out in Article 7a;
(b) it identifies a risk to the financial stability of the Union due to an alleged breach or non-application of Union law.
Before acting in accordance with the first subparagraph, ESMA may issue guidelines or recommendations pursuant to Article 16 of Regulation (EU) No 1095/2010.
5. Where ESMA, on the basis of the information received as part of the Joint Monitoring Mechanism and following the discussions held therein, considers that compliance with the requirement set out in Article 7a does not effectively ensure the reduction of Union clearing members’ and clients’ excessive exposure to Tier 2 CCPs, it shall review the regulatory technical standards referred to in Article 7a(5), setting, where necessary, an appropriate adaptation period which shall not exceed 12 months.’;
(19) Article 24 is replaced by the following:
‘Article 24
Emergency situations
1. The CCP's competent authority or any other relevant authority shall inform ESMA, the college, the relevant members of the ESCB, the Commission and other relevant authorities without undue delay of any emergency situation relating to a CCP, including all of the following:
(a) situations or events which impact, or are likely to impact, the prudential or financial soundness or the resilience of CCPs authorised in accordance with Article 14, their clearing members or clients;
(b) where a CCP intends to activate its recovery plan pursuant to Article 9 of Regulation (EU) No 2021/23, a competent authority has taken an early intervention measure pursuant to Article 18 of that Regulation or a competent authority has required a total or partial removal of the senior management or board of the CCP pursuant to Article 19 of that Regulation;
(c) where there are developments in financial markets, which may have an adverse effect on market liquidity, the transmission of monetary policy, the smooth operation of payment systems or the stability of the financial system in any of the Member States where the CCP or one of its clearing members are established.
2. ESMA shall coordinate competent authorities, the resolution authority designated pursuant to Article 3(1) of Regulation (EU) 2021/23 and colleges to build a common response to emergency situations relating to a CCP.
3. In case of emergency situations, except where a resolution authority has taken a resolution action in relation to a CCP pursuant to Article 21 of Regulation (EU) No 2021/23, and to coordinate the responses of competent authorities, a meeting of the CCP Supervisory Committee:
(a) may be convened by the Chair of the CCP Supervisory Committee;
(b) shall be convened by the Chair of the CCP Supervisory Committee, upon the request of two members of the CCP Supervisory Committee.
4. Any of the following authorities may also be invited to the meeting referred to in the paragraph 3, where relevant, considering the issues to be discussed at the meeting:
(a) the relevant central banks of issue;
(b) the relevant competent authorities for the supervision of clearing members, including, where relevant, the ECB in the framework of the tasks concerning the prudential supervision of credit institutions within the single supervisory mechanism conferred upon it in accordance with Council Regulation (EU) No 1024/2013;
(c) the relevant competent authorities for the supervision of trading venues;
(d) the relevant competent authorities for the supervision of clients where they are known;
(e) the relevant resolution authorities designated pursuant to Article 3(1) of Regulation (EU) 2021/23.
Where a meeting of the CCP Supervisory Committee is held pursuant to the first subparagraph, the Chair shall inform EBA, EIOPA, the ESRB and the Commission thereof who shall also be invited to participate to that meeting upon their request.
5. ESMA may, by simple request, require authorised CCPs, their clearing members and clients, connected financial market infrastructures and related third parties to whom those CCPs have outsourced operational functions or activities to provide all necessary information to enable ESMA to carry out its coordination function under this Article.
6. ESMA may, upon the proposal of the CCP Supervisory Committee, issue emergency recommendations pursuant to Article 16 of Regulation (EU) No 1095/2010 addressed to one or more competent authorities recommending them to adopt temporary or permanent supervisory decisions in line with the requirements set out in Article 16 and in Titles IV and V to avoid or mitigate significant adverse effects on the Union financial stability. ESMA may issue emergency recommendations only where more than one authorised CCP is impacted or where Union-wide events are destabilising cross-border cleared markets.’;
(20) Article 24a is amended as follows:
(a) in paragraph 2, point (d) (ii) is replaced by the following:
‘(ii) where the CCP Supervisory Committee convenes in relation to CCPs authorised in accordance with Article 14, in the context of discussions pertaining to paragraph 7 of this Article, the central banks of issue of the Union currencies of the financial instruments cleared by authorised CCPs that have requested membership of the CCP Supervisory Committee, who shall be non-voting.’;
(b) paragraph 3 is replaced by the following;
‘3. The Chair may invite as observers to the meetings of the CCP Supervisory Committee, where appropriate and necessary, members of the colleges referred to in Article 18, representatives from the relevant authorities of clients where they are known and from the relevant Union institutions and bodies.’;
(c) paragraph 7 is amended as follows:
(i) the introductory wording is replaced by the following:
‘In relation to CCPs authorised or applying for authorisation in accordance with Article 14, the CCP Supervisory Committee shall, for the purpose of Article 23a(2), prepare decisions and carry out the tasks entrusted to ESMA in the following points:’;
(ii) the following points (ba), (bb) and (bc) are inserted:
‘(ba) at least annually, discuss and identify supervisory priorities for CCPs authorised under Article 14 in order to feed in the preparation of the Union strategic supervisory priorities by ESMA in accordance with Article 29a of Regulation (EU) No 1095/2010;
(bb) consider, in cooperation with the EBA, EIOPA, and the ECB in carrying out its tasks within a single supervisory mechanism under Regulation (EU) No 1024/2013, any cross-border risks arising from CCPs’ activities, including due to CCPs’ interconnectedness, interlinkages and concentration risks due to such cross-border connections;
(bc) prepare draft opinions for adoption by the Board of Supervisors in accordance with Articles 17 and 17b and draft validation decisions in accordance with Article 49;’;
(iii) the following subparagraph is added:
‘ESMA shall on a yearly basis report to the Commission on the cross-border risks arising from CCPs’ activities referred to in point (bb) in the first subparagraph.’;
(21) Article 25 is amended as follows:
(a) in paragraph 4, the third subparagraph is replaced by the following;
‘The recognition decision shall be based on the conditions set out in paragraph 2 for Tier 1 CCPs and in paragraph 2, points (a) to (d), and paragraph 2b for Tier 2 CCPs. Within 180 working days of the determination that an application is complete in accordance with the second subparagraph, ESMA shall inform the applicant CCP in writing, with a fully reasoned explanation, whether the recognition has been granted or refused.’;
(b) in paragraph 5, the second subparagraph is replaced by the following:
‘Where the review is undertaken in accordance with point (a) of the first subparagraph, it shall be conducted in accordance with paragraphs 2 to 4. Where the review is undertaken in accordance with point (b) of the first subparagraph, it shall also be conducted in accordance with paragraphs 2 to 4, however the CCP referred to in paragraph 1 shall not be required to submit a new application but shall provide ESMA with all information necessary for the review of its recognition.’;
(c) in paragraph 6, the following subparagraph is added:
‘Where in the interests of the Union and considering the potential risks for the Union financial stability due to the expected participation of clearing members and trading venues established in the Union to CCPs established in a third country, the Commission may adopt the implementing act referred to in the first subparagraph irrespective of whether point (c) of that subparagraph is fulfilled.’;
(d) paragraph 7 is replaced by the following:
‘7. ESMA shall establish effective cooperation arrangements with the relevant competent authorities of third countries whose legal and supervisory frameworks have been recognised as equivalent to this Regulation in accordance with paragraph 6..’;
(e) the following paragraphs 7a, 7b and 7c are added:
‘7a. Where ESMA has not yet determined the tiering of a CCP or where ESMA has determined that all or some CCPs in a relevant third country are Tier 1 CCPs, the cooperation arrangements referred to in paragraph 7 shall take into account the risk the provision of clearing services by those CCPs entails and shall specify:
(a) the mechanism for the exchange of information on an annual basis between ESMA, the central banks of issue referred to in paragraph 3, point (f), and the competent authorities of the third countries concerned, so that ESMA is able to:
(i) ensure that the CCP complies with the conditions for recognition under paragraph 2;
(ii) identify any potential material impact on market liquidity or the financial stability of the Union or one or more of its Member States; and
(iii) monitor clearing activities in one, or more, of the CCPs established in such third country by clearing members established in the Union, or is part of a group subject to consolidated supervision in the Union.
(b) exceptionally, the mechanism for the exchange of information on a quarterly basis requiring detailed information covering the aspects referred to in paragraph 2a and in particular information on significant changes to risk models and parameters, extension of CCP activities and services and changes in the client account structure, with the aim to detect if a CCP is potentially close to becoming or is potentially likely to become systemically important for the financial stability of the Union or one or more of its Member States.
(c) the mechanism for prompt notification to ESMA where a third-country competent authority deems a CCP it is supervising to be in breach of the conditions of its authorisation or of other law to which it is subject;
(d) the procedures necessary for the effective monitoring of regulatory and supervisory developments in a third country;
(e) the procedures for third-country authorities to inform ESMA, the third-country CCP college referred to in Article 25c, and the central banks of issue referred to in paragraph 3, point (f), without undue delay of any emergency situations relating to the recognised CCP, including developments in financial markets, which may have an adverse effect on market liquidity and the stability of the financial system in the Union or one of its Member States and the procedures and contingency plans to address such situations;
(f) the procedures for third-country authorities to assure the effective enforcement of decisions adopted by ESMA in accordance with Articles 25f, 25k(1), point (b), 25l, 25m and 25p;
(g) the consent of third-country authorities to the onward sharing of any information they have provided to ESMA under the cooperation arrangements with the authorities referred to in paragraph 3 and the members of the third-country CCP college, subject to the professional secrecy requirements set out in Article 83.
7b. Where ESMA has determined that at least one CCP in a relevant third country is a Tier 2 CCP, the cooperation arrangements referred to in paragraph 7 shall specify in relation to those Tier 2 CCPs at least the following:
(a) the elements referred to in paragraph 7a, points (a), (c), (d), (e) and (g), where cooperation arrangements are not already established with the relevant third-country pursuant to the second subparagraph;
(b) the mechanism for the exchange of information on a monthly basis between ESMA, the central banks of issue referred to paragraph 3, point (f), and the competent authorities of the third countries concerned, including access to all information requested by ESMA to ensure CCP’s compliance with the requirements referred to in paragraph 2b;
(c) the procedures concerning the coordination of supervisory activities, including the agreement of third-country authorities to allow investigations and on-site inspections in accordance with Articles 25g and 25h respectively;
(d) the procedures for third-country authorities to assure the effective enforcement of decisions adopted by ESMA in accordance with Articles 25b, 25f to 25m, 25p and 25q;
(e) the procedures for third-country authorities to promptly inform ESMA of the following with a focus on aspects relevant for the Union or one or more of its Member States:
(i) the establishment of recovery plans and resolution plans and any subsequent material changes to such plans;
(ii) if a Tier 2 CCP intends to activate its recovery plan or where the third-country authorities have determined that there are indications of an emerging crisis situation that could affect the operations of that CCP, in particular, its ability to provide clearing services or where the third-country authorities envisage to take a resolution action in the near future.
7c. Where ESMA considers that a third-country competent authority fails to apply any of the provisions laid down in a cooperation arrangement established in accordance with paragraphs 7, 7a and 7b, it shall inform the Commission thereof confidentially and without delay. In such a case, the Commission may decide to review the implementing act adopted in accordance with paragraph 6.’;
(22) in Article 25b(1), the second subparagraph is replaced by the following:
‘ESMA shall require from each Tier 2 CCP all of the following:
(i)a confirmation, at least on a yearly basis, that the requirements referred to in Article 25(2b) points (a), (c) and (d), continue to be fulfilled;
(ii)information and data on a regular basis to ensure ESMA is able to supervise those CCPs’ compliance with the requirements referred to in Article 25(2b), point (a).’;
(23) in Article 25p(1), point (c) is replaced by the following;
‘(c) the CCP concerned has seriously and systematically infringed any of the applicable requirements laid down in this Regulation or no longer complies with any of the conditions for recognition laid down in Article 25 and has not taken the remedial action requested by ESMA within an appropriately set timeframe of up to a maximum of one year.’;
(24) the following Article 25r is inserted:
‘Article 25r
Public notice
Without prejudice to Articles 25p and 25q, ESMA may issue a public notice where all of the following conditions have been fulfilled:
(a)a third-country CCP has not paid the fees due under Article 25d or it has not paid fines due under Article 25j or periodic penalty payments due under Article 25k;
(b)the CCP has not taken any remedial action requested by ESMA in any of the situations laid down in Article 25p(1), point (c) within an appropriately set timeframe of up to six months.’;
(25) in Article 26(1), the first subparagraph is replaced by the following:
‘1. A CCP shall have robust governance arrangements, which include a clear organisational structure with well-defined, transparent and consistent lines of responsibility, effective processes to identify, manage, monitor and report the risks to which it is or might be exposed, and adequate internal control mechanisms, including sound administrative and accounting procedures. A CCP shall not be or become a clearing member, a client, or establish indirect clearing arrangements with a clearing member with the aim to undertake clearing activities at a CCP.’;
(26) Article 31 is amended as follows:
(a) in paragraph 2,the third and fourth subparagraph are replaced by the following:
‘The competent authority shall, promptly and in any event within two working days of receipt of the notification referred to in this paragraph and of the information referred to in paragraph 3, acknowledge receipt in writing thereof to the proposed acquirer or vendor and share the information with ESMA and the college.
Within 60 working days as from the date of the written acknowledgement of receipt of the notification and all documents required to be attached to the notification on the basis of the list referred to in Article 32(4) and unless extended in accordance with this Article, (‘the assessment period’), the competent authority shall carry out the assessment provided for in Article 32(1) (‘the assessment’). The college shall issue an opinion pursuant to Article 19 and ESMA shall issue an opinion pursuant to Article 24a(7), first subparagraph, point (bc) and in accordance with the procedure under Article 17b during the assessment period.’;
(b) in paragraph 3 the first subparagraph is replaced by the following:
‘The competent authority, ESMA and the college may, during the assessment period, where necessary, but no later than on the 50th working day of the assessment period, request any further information that is necessary to complete the assessment. Such request shall be made in writing and shall specify the additional information needed.’;
(27) in Article 32(1), the fourth subparagraph is replaced by the following:
‘The assessment of the competent authority concerning the notification provided for in Article 31(2) and the information referred to in Article 31(3), shall be subject to an opinion of the college pursuant to Article 19 and an opinion by ESMA pursuant to Article 24a(7), first subparagraph, point (bc), issued in accordance with the procedure set out in Article 17b.’;
(28) Article 35 is amended as follows:
(a) in paragraph 1, the second subparagraph is replaced by the following:
‘A CCP shall not outsource major activities linked to risk management unless such outsourcing is approved by the competent authority. The decision of the competent authority shall be subject to an opinion of the college pursuant to Article 19 and an opinion by ESMA pursuant to Article 24a(7)(bc) issued in accordance with the procedure set out in Article 17b.’;
(b) paragraph 3 is replaced by the following:
‘3. A CCP shall make all information necessary to enable the competent authority, ESMA and the college to assess the compliance of the performance of the outsourced activities with this Regulation available on request.’;
(29) Article 37 is amended as follows:
(a) paragraph 1 is replaced by the following:
‘1. A CCP shall establish, where relevant per type of product cleared, the categories of admissible clearing members and the admission criteria, upon the advice of the risk committee pursuant to Article 28(3). Such criteria shall be non-discriminatory, transparent and objective so as to ensure fair and open access to the CCP and shall ensure that clearing members have sufficient financial resources and operational capacity to meet the obligations arising from participation in a CCP. Criteria that restrict access shall be permitted only to the extent that their objective is to control the risk for the CCP. The criteria shall ensure that CCPs or clearing houses cannot be clearing members, directly or indirectly, of the CCP.’;
(b) the following paragraph 1a is inserted:
‘1a. A CCP shall accept non-financial counterparties as clearing members only if they are able to demonstrate that they are able to fulfil the margin requirements and default fund contributions, including in stressed market conditions.
The competent authority of a CCP accepting non-financial counterparties shall regularly review such arrangements and report to ESMA and the college on their appropriateness.
A non-financial counterparty acting as a clearing member shall not be permitted to offer client clearing services and shall only keep accounts at the CCP for assets and positions held for its own account.
ESMA may issue an opinion or a recommendation on the appropriateness of such arrangements following an ad-hoc peer review.’;
(c) the following paragraph 7 is added:
‘7. ESMA shall, after having consulted the EBA, develop draft regulatory technical standards further specifying the elements to be considered when laying down the admission criteria referred to in paragraph 1.
ESMA shall submit those draft regulatory technical standards to the Commission by … [PO please enter 12 months after entry into force of this Regulation].
Power is delegated to the Commission to adopt the regulatory technical standards referred to in the first subparagraph in accordance with Articles 10 to 14 of Regulation (EU) No 1095/2010”.
(30) Article 38 is amended as follows:
(a) in paragraph 7, the following subparagraph is added:
‘Clearing members providing clearing services and clients providing clearing services shall inform their clients in a clear and transparent manner of the way the margin models of the CCP work, including in stress situations, and provide them with a simulation of the margin requirements they may be subject to under different scenarios. This shall include both the margins required by the CCP and any additional margins required by the clearing members and the clients providing clearing services themselves.’;
(b) paragraph 8 is replaced by the following:
‘8. The clearing members of the CCP and clients providing clearing services, shall clearly inform their existing and potential clients of the potential losses or other costs that they may bear as a result of the application of default management procedures and loss and position allocation arrangements under the CCP’s operating rules, including the type of compensation they may receive, taking into account Article 48(7). Clients shall be provided with sufficiently detailed information to ensure that they understand the worst-case losses or other costs they could face should the CCP undertake recovery measures.’;
(31) Article 41 is amended as follows:
(a) paragraphs 1, 2 and are replaced by the following:
‘1. A CCP shall impose, call and collect margins to limit its credit exposures from its clearing members and, where relevant, from CCPs with which it has interoperability arrangements. Such margins shall be sufficient to cover potential exposures that the CCP estimates will occur until the liquidation of the relevant positions. They shall also be sufficient to cover losses that result from at least 99 % of the exposures movements over an appropriate time horizon and they shall ensure that a CCP fully collateralises its exposures with all its clearing members, and, where relevant, with CCPs with which it has interoperability arrangements, at least on a daily basis. A CCP shall continuously monitor and revise the level of its margins to reflect current market conditions taking into account any potentially procyclical effects of such revisions.
2. A CCP shall adopt models and parameters in setting its margin requirements that capture the risk characteristics of the products cleared and take into account the interval between margin collections, market liquidity and the possibility of changes over the duration of the transaction. The models shall be validated by the competent authority and subject to an opinion in accordance with Article 19 and an opinion by ESMA in accordance with Article 24a(7), first subparagraph, point (bc), issued in accordance with the procedure under Article 17b.
3. A CCP shall call and collect margins on an intraday basis, at least when predefined thresholds are exceeded. In doing so a CCP shall consider the potential impact of its intraday margin collections and payments on the liquidity position of its participants. A CCP shall strive to the best of its ability not to hold intraday variation margin calls after all payments due have been received.’;
(32) in Article 44(1), the second subparagraph is replaced by the following :
‘A CCP shall measure, on a daily basis, its potential liquidity needs. It shall take into account the liquidity risk generated by the default of at least the two entities, including clearing members or liquidity providers, to which it has the largest exposures.’;
(33) Article 46 is amended as follows:
(a) paragraph 1 is replaced by the following:
‘1. A CCP shall accept highly liquid collateral with minimal credit and market risk to cover its initial and ongoing exposure to its clearing members. A CCP may accept public guarantees or public bank or commercial bank guarantees, provided that they are unconditionally available upon request within the liquidation period referred to in Article 41. Where bank guarantees are provided to a CCP, that CCP shall take them into account when calculating its exposure to the bank that is also a clearing member. The CCP shall apply adequate haircuts to asset values and guarantees to reflect the potential for their value to decline over the interval between their last revaluation and the time by which they can reasonably be assumed to be liquidated. It shall take into account the liquidity risk following the default of a market participant and the concentration risk on certain assets that may result in establishing the acceptable collateral and the relevant haircuts. When revising the level of the haircuts it applies to the assets it accepts as collateral, the CCP shall take into account any potential procyclicality effects of such revisions.’;
(b) in paragraph 3, first subparagraph, point (b) is replaced by the following:
‘(b) the haircuts referred to in paragraph 1, taking into account the objective to limit their procyclicality; and’;
(34) Article 49 is amended as follows:
(a) paragraphs 1 to 1e are replaced by the following:
‘1. A CCP shall regularly review the models and parameters adopted to calculate its margin requirements, default fund contributions, collateral requirements and other risk control mechanisms. It shall subject the models to rigorous and frequent stress tests to assess their resilience in extreme but plausible market conditions and shall perform back tests to assess the reliability of the methodology adopted. The CCP shall obtain independent validation, shall inform its competent authority and ESMA of the results of the tests performed and shall obtain their validation in accordance with paragraphs 1a, to 1e before adopting any significant change to the models.
The adopted models, including any significant change thereto, shall be subject to an opinion of the college in accordance with this Article.
ESMA shall ensure that information on the results of the stress tests is passed on to the ESAs, the ESCB and the Single Resolution Board to enable them to assess the exposure of financial undertakings to the default of CCPs.
1a. Where a CCP intends to adopt any significant change to the models referred to in paragraph 1, it shall submit an application for authorisation of such change in an electronic format via the central database referred to in Article 17(7) where it shall be immediately shared with the CCP’s competent authority, ESMA and the college. The CCP shall enclose an independent validation of the intended change to its application.
Where a CCP considers that the change to the models referred to in paragraph 1 it intends to adopt is not significant as referred to paragraph 1g, the CCP shall request that the application be subject to a non-objection procedure under paragraph 1b. In that case, the CCP may start applying such change before the decision of the CCP’s competent authority and ESMA pursuant to paragraph 1b.
The CCP’s competent authority shall, in cooperation with ESMA, within 2 working days after such application has been received, acknowledge receipt of the application, confirming to the CCP that it contains the required documents. Where one of them concludes that the application does not contain the required documents, the application shall be rejected.
1b. Within 10 working days of the date referred to in the third subparagraph of paragraph 1a, the competent authority and ESMA shall assess if the proposed change qualifies as a significant change pursuant to paragraph 1g. Where one of them concludes that the change meets one of the conditions referred to in paragraph 1g, the application shall be assessed under paragraphs 1c, 1d and1e and the CCP’s competent authority, in cooperation with ESMA, shall inform in writing the applicant CCP thereof.
Where within 10 working days of the date referred to in the third subparagraph of paragraph 1a, the applicant CCP has not been informed in writing that its request for the non-objection procedure to apply has been denied, that change shall be deemed as validated.
Where a request for the non-objection procedure has been denied, the CCP shall, within 5 working days from the notification referred to in the first subparagraph, no longer use that model change. Within 10 working days from that notification, the CCP shall either withdraw the application or complement the application with the independent validation of the change.
1c. Within 30 working days of the date referred to in the third subparagraph of paragraph 1a:
(a)the competent authority shall conduct a risk assessment of the significant change and submit its report to ESMA and the college;
(b)ESMA shall conduct a risk assessment of the significant change and submit its report to the CCP competent authority and the college.
1d. Within 10 working days of receipt of the reports referred to in paragraph 1c, the CCP’s competent authority and ESMA shall each adopt a decision, taking into account such reports and inform each other of the decision taken. Where one of them has not validated the change, the validation shall be refused.
1e. Within 5 working days of the decisions being adopted under paragraph 1d, the competent authority and ESMA shall inform the CCP in writing, including a fully reasoned explanation, whether the validation has been granted or refused.
(b)the following paragraphs 1f and 1g are inserted:
1f. The CCP may not adopt any significant change to the models referred to in paragraph 1, before obtaining the validations by its competent authority and ESMA. The competent authority, in agreement with ESMA, may allow for a provisional adoption of a significant change of those models prior to their validations where duly justified due to an emergency situation under Article 24 of this Regulation. Such a temporary change to the models shall only be allowed for a certain period of time jointly specified by the CCP’s competent authority and ESMA. After the expiry of this period, the CCP shall not be allowed to use such model change unless it has been approved pursuant to paragraphs 1a, 1c, 1d and 1e.
1g. A change shall be considered as significant where one of following conditions is met:
(a) the change leads to a decrease or increase of the total pre-funded financial resources, including margin requirements, default fund and skin-in-the-game, greater than 15 %;
(b) the structure, structural elements or the margin parameters of the margin model are changed or a margin module is introduced, removed, or amended in a manner which leads to a decrease or increase of this margin module greater than 15 % at the CCP level;
(c) the methodology used to compute portfolio offsets is changed leading to a decrease or increase of the total margin requirements for these financial instruments greater than 10 %;
(d) the methodology for defining and calibrating stress test scenarios for the purpose of determining default fund exposures, is changed, leading to a decrease or increase greater than 20 % of a default fund, or greater than 50 % of any individual default fund contribution;
(e) the methodology applied to assess liquidity risk and monitor concentration risk, is changed, leading to a decrease or increase of the estimated liquidity needs in any currency greater than 20 % or the total liquidity needs greater than 10 %;
(f) the methodology applied to value collateral, calibrate collateral haircut or set concentration limits, is changed, such that the total value of non-cash collateral decreases or increases by more than 10 %; provided that the CCP’s proposed change does not fulfil any criteria for the extension of CCP’s authorisation specified in Article 2(1);
(g) any other change to the models that could have a material effect on the overall risk of the CCP.”
(c) paragraph 5 is replaced by the following:
‘5. ESMA shall, in close cooperation with the ESCB, develop draft regulatory technical standards specifying the list of required documents that shall accompany an application for validation pursuant to paragraph 1a and shall specify the information such documents shall contain to demonstrate that the CCP complies with all relevant requirements of this Regulation.
ESMA shall submit those draft regulatory technical standards to the Commission by … [PO: please insert date =12 months after the date of entry into force of this Regulation]
Power is delegated to the Commission to adopt the regulatory technical standards referred to in the first subparagraph in accordance with Articles 10 to 14 of Regulation (EU) No 1095/2010.’;
(d) the following paragraph 6 is added:
‘6. ESMA shall develop draft implementing technical standards specifying the electronic format of the application for validation referred to in paragraph 1a to be submitted to the central database.
ESMA shall submit those draft implementing technical standards to the Commission by… [PO: please insert date = 12 months after the date of entry into force of this Regulation].
Power is conferred on the Commission to adopt the implementing technical standards referred to in the first subparagraph in accordance with Article 15 of Regulation (EU) No 1095/2010.’;
(1) in Article 54, paragraph 1 is replaced by the following:
‘1. An interoperability arrangement shall be subject to the prior approval of the competent authorities of the CCPs involved. The CCPs’ competent authorities shall request the opinion of ESMA in accordance with 24a(7), first subparagraph, point (bc), and the college in accordance with Article 19, and issued in accordance with the procedure set out in Article 17b.’;
(2) In Article 82, paragraphs 2 and 3 are replaced by the following:
“2. The power to adopt delegated acts referred to in Articles 1(6), Article 3(5), Article 4(3a), Article 7a(6), Article 17a(6), Article 25(2a), Article 25(6a), Article 25a(3), Article 25d(3), Article 25i(7), Article 25o, Article 64(7), Article 70, Article 72(3), and Article 85(2) shall be conferred to the Commission for an indeterminate period of time.
3. The delegation of power referred to in Article 1(6), Article 3(5), Article 4(3a), Article 7a(6), Article 17a(6), Article 25(2a), Article 25(6a), Article 25a(3), Article 25d(3), Article 25i(7), Article 25o, Article 64(7), Article 70, Article 72(3) and Article 85(2) may be revoked at any time by the European Parliament or by the Council. A decision to revoke shall put an end to the delegation of the power specified in that decision. It shall take effect the day following the publication of the decision in the Official Journal of the European Union or at a later date specified therein. It shall not affect the validity of any delegated acts already in force.
(3) Article 85 is amended as follows;
(a) paragraph 1 is replaced by the following:
‘1. By [PO: please insert the date =5 years after the date of entry into force of this Regulation] the Commission shall assess the application of this Regulation and prepare a general report. The Commission shall submit that report to the European Parliament and to the Council, together with any appropriate proposals.’;
(b) the following paragraph 1b is inserted:
‘1b. By [PO: please insert the date = 1 year after the entry into force of this Regulation] ESMA shall submit a report to the Commission on the possibility and feasibility to require the segregation of accounts across the clearing chain of non-financial and financial counterparties. The report shall be accompanied by a cost-benefit analysis.’;
(c) paragraph 7 is deleted;
(4) Article 90 is amended as follows:
“By [PO please insert the date = please insert 3 years after the date of entry into force of this Regulation], ESMA shall assess the staffing and resources needs arising from the assumption of its powers and duties in accordance with this Regulation and submit a report to the European Parliament, the Council and the Commission.”
Article 2 - Amendments to Regulation (EU) No 575/2013
(1) in paragraph 4, point (b) is replaced by the following:
‘(b) intragroup transactions entered into with financial counterparties as defined in Article 2, point 8, of Regulation (EU) No 648/2012, financial institutions or ancillary services undertakings that are established in the Union or that are established in a third country that applies prudential and supervisory requirements to those financial counterparties, financial institutions or ancillary services undertakings that are at least equivalent to those applied in the Union, unless Member States adopt national law requiring the structural separation within a banking group, in which case the competent authorities may require those intragroup transactions between the structurally separated entities to be included in the own funds requirements;’
(2) the following paragraph [4c] is inserted:
‘[4c]. For the purposes of paragraph 4, point (b), the Commission may adopt, by way of implementing acts, and subject to the examination procedure referred to in Article 464(2), a decision as to whether a third country applies prudential supervisory and regulatory requirements at least equivalent to those applied in the Union.
In the absence of such a decision, institutions may until 31 December 2027 continue to exclude the concerned intragroup transactions from the own funds requirements for CVA risk provided that the relevant competent authorities have approved the third country as eligible for that treatment before 31 December 2026. Competent authorities shall notify the EBA of such cases by 31 March 2027.’
Article 3 - Amendments to Regulation (EU) 2017/1131
(1) in Article 2, the following point (24) is added
‘(24) ‘CCP’ means a legal personas referred to in Article 2 (1) of Regulation (EU) No 648/2012.’;
(2) Article 17 is amended as follows:
(a) paragraph 4 is replaced by the following:
‘4. The aggregate risk exposure to the same counterparty of an MMF stemming from derivative transactions which fulfil the conditions set out in Article 13 and which are not centrally cleared through a CCP authorised in accordance with Article 14 of Regulation (EU) No 648/2012 or recognised in accordance with Article 25 of that Regulation, shall not exceed 5 % of the assets of the MMF.’;
(b) in paragraph 6, first subparagraph, point (c) is replaced by the following:
‘(c) financial derivative instruments that are not centrally cleared through a CCP authorised in accordance with Article 14 of Regulation (EU) No 648/2012 or recognised in accordance with Article 25 of that Regulation, giving counterparty risk exposure to that body.’.
Article 4 - Entry into force and application
This Regulation shall be binding in its entirety and directly applicable in all Member States.