On Wednesday 24 January, the MEPs of the committee on economic and monetary affairs (ECON) of the European Parliament will take a position on the joint draft 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).
Currently, some CCPs have credit institution status and are subject to the banking regulatory and prudential framework, while others are considered market infrastructure and are not required to apply the same rules as their competitors. The outlines of the Commission’s legislative proposal, which was presented in late November 2016 (see EUROPE 11677), proposes that in future, all CCPs authorised in the EU come under a single recovery and resolution regime.
At the end of November, when the committee examined the 400 or so amendments tabled to the report, Swinburne welcomed the consensus on the subjects addressed by the amendments. Nearly 100 amendments were tabled by the co-rapporteurs themselves to add “a touch of colour” to the initial draft text, as she put it at the time.
The points on which there is agreement are no secret and were clear from the first exchange of views on this report (see EUROPE 11884): - limiting the use of public money to a last-resort option to resolve a crisis; - protecting the customers of clearing members; - creating stress tests for recovery applications and regular crisis simulation exercises; - building more transparency and proportionality into the process.
There were greater differences of opinion on the other points, not just between political groups, but also between the co-rapporteurs.
One example of this is the “no creditor worse off” (NCWO) principle, whereby no creditor may be given worse treatment in the event of liquidation. Swinburne has introduced an amendment stipulating that when the resolution authority uses a resolution instrument, it must ensure that shareholders, creditors, clearing members and their customers do not suffer greater losses than if the CCP had been liquidated under a normal insolvency procedure.
The EPP view, on the other hand, is that taking customers into consideration within the framework of this principle would be too vast an undertaking, which would mean that the resolution authority would have managed to identify the customers and taken into account the entire clearing system situation when deciding to take resolution measures.
In a number of amendments, co-rapporteur Jakob von Weizsäcker also maintained his ambitious – and highly criticised – proposal for a Single Resolution Board and a Single Resolution Fund for CCPs, to ensure the proper application of the resolution instruments and the exercise of the resolution powers. The reason this proposal is in a separate amendment and not the original report is that his co-rapporteur is not in favour of it; nor is the ALDE group.
In particular, many MEPs felt that this proposal should not be part of this framework, but should be brought in by the revision of the ‘EMIR’ regulation on market infrastructures and the recent proposed revision of the competences of the European supervisory authorities. The measure has therefore little chance of getting through as part of this proposal. (Original version in French by Marion Fontana)