On Wednesday 4 December, the Member States' ambassadors to the EU (Coreper) will agree a political agreement in principle on the proposal for a regulation on the establishment of a framework for the redress and resolution of central clearing houses (CCPs). Long blocked in the EU Council, the text is now to be unanimously supported by the Member States, according to a European source.
These clearing houses provide the link between two parties to a financial transaction. Their purpose is to ensure that the transaction goes smoothly, even if one of the parties fails, and they are therefore connected with all financial institutions active in the related markets.
Currently, some clearing houses have credit institution status and are subject to the banking regulatory and prudential framework, while others are considered as market infrastructures and do not have to apply the same rules as their competitors.
In general, the Commission's legislative proposal, presented at the end of November 2016 (see EUROPE 11677/8), proposes that from now on all clearing houses authorised in the EU should be subject to a single regime of redress and resolution. The new rules are comparable to those put in place for banks in the BRRD directive.
The EU Council text broadly maintains the structure of the Commission's proposal in three stages, namely: - the development of preventive resolution plans; - the possibility of competent authorities intervening in clearing house operations when their viability is at risk, but before they have reached the default stage; - the activation of resolution plans.
The compromise text also maintains the objective of avoiding a 'bail out' and provides for clearing houses using their own resources to cover losses before resorting to other collection measures requiring financial contributions from clearing members.
The major change made by the EU Council compared to the Commission's proposal concerns the composition of the colleges of the resolution authorities planned for each central counterparty (see EUROPE 11891/24), in order to undertake the necessary preparatory and resolution actions.
The initial proposal did in fact limit participation in colleges to members of the clearing house concerned. However, in order to satisfy countries - such as Luxembourg or Malta - that do not have a clearing house, the EU Council's text now provides that representatives of all interested parties may participate in the resolution college.
Once the EU Council has adopted its position, interinstitutional negotiations with the European Parliament, which adopted its position in January 2018 (see EUROPE 11946/10), can finally start. (Original version in French by Marion Fontana)