Representatives of the European Parliament and the Romanian Presidency of the EU Council will continue their negotiations on Monday 18 February on the new supervisory mechanism for central counterparties (CCPs) established in the EU and third countries. As at the last 'trilogue' held on 12 February, the meeting should focus on governance issues.
CCPs are known to improve financial stability by linking two parties to a transaction. The Commission's proposal dates back to June 2017, in response in particular to the departure of the United Kingdom - where almost 75% of interest rate derivatives denominated in euros are offset (see EUROPE 11907) - from the EU.
As is often the case, the strategy on this issue aims to move from the most consensual to the most difficult issues. Thus, after a first trilogue which mainly made it possible to compare the positions of the co-legislators, the parties discussed the dual system distinguishing CCPs according to their systemic importance, a European source told us.
The key element of the proposal was that, as a last resort, the European Securities and Markets Authority (ESMA) could consider that a third-country CCP is of such systemic importance that it should not benefit from the equivalence regime with the EU. The CCP concerned would then be required to establish itself in the EU in order to be authorised to provide its services.
The co-legislators, in addition, have agreed on the principle of this ESMA recommendation. They have also agreed that ESMA should consult the European Systemic Risk Board before refusing to recognise equivalence for a CCP.
However, the issue is not entirely closed and the co-legislators have yet to discuss the concrete modalities, according to the same source. Indeed, ESMA would only be responsible for the analysis, while the Commission would have to formally adopt the decision. The question is whether it should do so by a delegated act, as the Parliament wants, or by an implementing act, as the Council wants.
On 12 February, during the third 'trilogue', the co-legislators discussed governance issues, including the composition of the new CCP Supervisory Committee within ESMA.
The Commission proposed that the ‘CCP Executive Session’ should be composed of four permanent members, namely a president and two directors with voting rights as well as a representative of the European Central Bank (ECB) and a representative of the Commission without voting rights.
The representative of the competent authority for the CCP about which the executive session is meeting, as well as a representative of each of the central banks of issue relevant to the CCP, could also attend as non-permanent members.
The European Parliament and the Council, on the other hand, prefer referring to it as the ‘internal CCP Supervisory Committee'. In particular, the Parliament wants eight permanent members, including a vice-president and four directors, while the Council wants stronger involvement from the relevant national authorities.
Ongoing discussions also involve the participation, for certain decisions, of representatives of the central banks issuing EU currencies cleared or to be cleared by the central counterparty on which the Supervisory Committee meets.
Another blocking point is the appointment of the chairman of this CCP Supervisory Committee. The Commission and the Parliament want him to be an independent member, selected by an open procedure organised by the Commission, involving the Parliament and the Council. But the Member States, on the other hand, want the chairman to be appointed by the Supervisory Committee.
According to the same source, in addition to Monday's meeting, at least one other 'trilogue' should be necessary to conclude the negotiations. (Original version in French by Marion Fontana)