The draft joint report by Jakob von Weizsäcker (S&D, Germany) and Kay Swinburne (ECR, UK) on the proposed regulation for a recovery and resolution framework for central counterparties (CCP) was favourably received, on Monday 16 October, when it was examined by the members of the committee on economic and monetary affairs (ECON) of the European Parliament. The idea of a single resolution fund for the resolution of central counterparties, defended by the Social Democrats, did not secure unanimity.
Although the ECR and S&D may seem to make unexpected bedfellows, the co-rapporteurs said that they had worked together “optimally” towards a common objective: improving protection for taxpayers when it comes to safeguarding financial stability.
Readers may recall that the legislative proposal presented at the end of November 2016 aims to complete this framework and govern the recovery and resolution of CCPs (see EUROPE 11677) with new rules similar to those set in place for banks in the 'BRRD' directive which are based on international standards.
In the document, the rapporteurs first of all propose clearly stating in the text that the proposed framework should also consider the possibility of CCPs undertaking a resolution procedure for reasons other than default by one or more of its clearing members. In particular, they propose including the following situations: losses due to bankruptcy, shortcomings concerning the safekeeping of securities, investment errors, legal gaps or operational dysfunctions.
As regards the recovery plan that central counterparties must draw up, they propose to make these more binding by including: - provisions for high levels of losses to be absorbed by clearing members before making use of any instrument aiming to divide the losses between clients; - adequate incentive measures to ensure that CCPs, clearing members and clients do not permit the situation to deteriorate further.
In order for these incentive measures to be credible, they also propose that any gap compared to the recovery plan be submitted for the approval of the competent authority.
As far as the EPP, ALDE and Greens/EFA groups are concerned, this report is a good starting point, although some aspects remain to be clarified. The European Commission has also welcomed the proposed amendments, considering that they do much to improve the initial proposal.
Towards a Single Resolution Fund for CCPs?
Although the co-rapporteurs note many compromises, they did not manage to agree on everything. In particular, the idea of setting up a Single Resolution Fund for CCPs does not feature in the draft report and will be covered in a separate amendment tabled by von Weizsäcker.
Although, he believes, this is a prerequisite for a transition to a single architecture for recovery and resolution, Cora van Nieuwenhuizen (ALDE, Netherlands) argues that political considerations should not be mixed up with this highly technical dossier. These discussions are more suited to the framework of the revision of the 'EMIR' regulation on the market infrastructure or the recent proposed revision of the competences of the European Supervisory Authorities (see EUROPE 11866), she said.
Speaking on behalf of the EPP group, Brian Hayes (Ireland) said that it was too early to discuss these matters, which are closely linked to other dossiers still in progress, without any certainty as to the conclusions that will emerge from them.
Discussions will continue on Tuesday 17 October, at the first meeting of the shadow rapporteurs, ahead of the vote at the ECON committee in January 2018. (Original version in French by Marion Fontana)