On 10 August 2022, the European Commission published a report to the European Parliament and the Council on the treatment of central counterparty (CCP) equity in the write-down and conversion tool under the Regulation on CCP recovery and resolution (CCP-RRR).

Under Article 27(7) of the CCP-RRR, the resolution authority must write down and convert any instruments of ownership, debt instruments and other unsecured liabilities immediately before or together with the application of another resolution tool. This is not required if a different sequence is applied that would minimise deviations from the ‘no creditor worse off’ principle and better achieve the resolution objectives.

The fourth subparagraph of Article 96 of the CCP-RRR mandates the Commission to report by 31 December 2021 to the European Parliament and the Council on the application of Article 27(7) of the CCP-RRR.

Given that technical work is still ongoing and practical experience is limited the report concludes that at this time no recommendation to amend Article 27 of the CCP-RRR can be made. However, there is a need to clarify the issues and further work will enable a more comprehensive and well-rounded assessment.