This week representatives of Member States met to discuss the European Commission’s November 2016 proposal for a regulation on recovery and resolution for CCPs. The proposed legislation will set out measures governing preparation of recovery and resolution plans for the CCPs, and will equip national resolution authorities with tools and powers to ensure orderly management of a failing CCP. The legislation will also address the coordination of recovery and resolution actions with third countries, including the proposed obligation for EU CCPs to adopt contractual provisions ensuring that the actions in their recovery plans are binding across jurisdictions.
The Council working group meeting on 08 February was the second formal meeting on the subject, but the first to undertake a substantial review of the proposed legislation. The meeting, hosted by Malta which currently holds the rotating Presidency of the Council, provided opportunity for representatives of Member States to provide initial comments on the draft legislation. While there appears to be broad support for the principles and objectives of the proposed regulation, certain Member States have expressed initial concerns around ensuring the access to public funds is a last resort and that there is more of a distinction between actions which may be taken in the event of CCP failure resulting from default and non-default losses. However, an agreement on the proposal is not likely be reached before the completion of work by the international standard setters. Consequently, the Maltese Presidency does not expect to achieve major progress on this subject and we understand that only three additional Council working group meetings will take place before the end of June. Discussions will continue under the chairmanship of Estonia, which will take over Council Presidency in July.
Legislative review by the other co-legislator, the European Parliament, is yet to commence. The Parliament’s Economic and Monetary Affairs Committee (ECON) is expected to schedule its first exchange of views on the proposal shortly.