Interinstitutional negotiations on the new supervisory mechanism for central counterparties (CCPs) established in the European Union and third countries (see EUROPE 11807) are nearly over the finish line, a European source told EUROPE on Thursday 21 February.
The last trilogue, held on Tuesday 19 February and lasting for several hours, identified and addressed the main elements of a global special agreement. The representatives of the European Parliament and the Romanian Presidency of the Council of the EU thus decided that there will be no further 'trilogue' on this issue and that the agreement can be finalised through informal written exchanges.
The overall special agreement package has yet to be confirmed by all parties. Furthermore, the topic was also the subject of discussion in a working group at the Council on Thursday, 21 February.
The parties would have stressed the urgency of adopting this dossier quickly, because of the link with Brexit. Almost 75% of interest rate derivatives that are denominated in euros, are offset in the United Kingdom, which will soon become a third country once more.
According to a Note from the Romanian Presidency of the Council of the EU, viewed by EUROPE, the European Commission has also piled on the pressure. According to this, in the event of a no-deal Brexit, there will not be sufficient time to adopt all delegated and implementing acts before March 2020, if the political process is not closed before the beginning of March.
Governance. During the last trilogue, co-legislators completed the final open questions on governance (see EUROPE 12195).
According to the Romanian Note, the special agreement package provides for the creation of a single CCP supervisory committee within the European Securities and Markets Authority (ESMA), irrespective of whether the committee is meeting in respect of a CCP established in the EU or in a third country.
The Council should now finally be ready to accept the two additional independent members requested by Parliament. These independent members would also be properly selected through an open procedure organised by the Commission and with the involvement of the European Parliament.
Supervision of third country CCPs. The special agreement also maintains the option, as a last resort, of ESMA being able to deliberate whether a central counterparty established in a third country is of such systemic importance that it should not benefit from the equivalence regime pertaining to the rules of its country of establishment and EU rules. The CCP in question would then be required to establish itself in the EU in order to be authorised to provide its services.
ESMA would only be responsible for carrying out the analysis, while the Commission would have to formally adopt the decision through an implementing act, as requested by the Council, and not through a delegated act.
Regarding the dual system that differentiates CCPs according to their systemic importance, co-legislators would have agreed that the criteria should cover all CCP activities and should include the risk profile, customer structure, and the effect of any default on market liquidity.
The special agreement moreover provides for an adjustment period of 18 months in the event of a reclassification of a CCP from 'category 1' (lower systemic risk) to 'category 2' (higher systemic risk).
Supervision of EU CCPs. According to the same Note, the Council were successful on several points regarding the supervision of CCPs established in the EU.
In particular, the special agreement provides that ESMA's prior consent is not required for supervisory decisions taken by national competent authorities. In return, the Council accepted a provision obliging national competent authorities to “duly” take into account the opinions issued by ESMA.
However, a handful of open points remain. In respect of decision not to recognise a CCP of systemically important third countries, the European Parliament would like the reference to “as a last resort” to only be included in a recital and not in the article pertaining to this mechanism.
In exchange for greater flexibility on this point from the European Parliament, the Romanian Presidency of the Council might – in accordance with MEP wishes – agree to reduce the clause on the revision of the rules by the Commission to 36 months once the entry into force of the text has taken place.
While the agreement is within reach, it is not yet a done deal, according to our source. Member States may decide to make some changes to the special agreement, which would then have to be discussed on a technical level with the European Parliament. (Original version in French by Marion Fontana)