On Wednesday 24 January, the MEPs of the committee on economic and monetary affairs (ECON) of the European Parliament adopted by a very large majority (49 votes to three and six abstentions) the draft joint report by Jakob von Weizsäcker (S&D, Germany) and Kay Swinburne (ECR, UK) on the resolution and recovery framework for central counterparties (CCP).
In a press release following the vote, von Weizsäcker welcomed the adoption of this report, which “gives the right incentives for prudent risk management and improves the protection of taxpayers”.
The MEPs took a position in favour of recovery plans that provide for a large quantity of losses to be absorbed by the clearing members before any recourse to an instrument to distribute losses between customers.
They also called for a clear distinction between a default situation in which one or more clearing members are failing to comply with their financial obligations and other situations, such as bankruptcy, fraud or a cyber-attack leading to losses. They want CCPs to draw up full and effective plans to deal with both situations and also take account of a combination of the two.
As regards the principle of "no creditor worse off" (NCWO), whereby no creditor would receive worse treatment than in the event of liquidation, they decided that the assessment of losses should be carried out by an independent entity, once the resolution measures have been taken, and should take account of the adverse effects caused by systemic instability.
As announced in a previous article (see EUROPE 11945), von Weizsäcker's proposal to create a Single Resolution Board and Single Resolution Fund for CCPs did not make the final cut. However, the MEPs agreed for a revision clause to be included on the basis of future developments related to the revision of the 'EMIR' regulation on market infrastructure and the revision of the competences of the European Supervisory Authorities.
The MEPs also supported a mandate to open inter-institutional negotiations, which may start as soon as the Council has adopted its own position on the text. (Original version in French by Marion Fontana)