United Kingdom (and EU regulation)

ESMA final reports on CCP resolution regime

On 16 May 2022, the European Securities and Markets Authority (ESMA) published its final reports on the central counterparties’ (CCPs) resolution regime under the Regulation on CCP recovery and resolution (CCPRRR).

The final reports are:

Final report on guidelines on the application of the circumstances under which a CCP is deemed to be failing or likely to fail (Article 22(6) of CCPRRR). The guidelines are addressed to Member State competent authorities and seek to promote the convergence of supervisory and resolution practices regarding the circumstances under which they should determine a CCP being deemed to be failing or likely to fail. The guidelines list a set of objective elements that should support the determination that a CCP is failing or likely to fail, in accordance with the circumstances laid down in Article 22(3) of CCPRRR. The guidelines do not constrain the ultimate discretion of the Member State competent authority and of the resolution authority in making the determination that a CCP is failing or likely to fail.
Final report containing draft regulatory technical standards (RTS) on resolution colleges (Article 4(7) of the CCPRRR). The draft RTS specify the content of the written arrangements and procedures for the functioning of the resolution colleges.
Final report containing draft RTS on the content of CCP resolution plans (Article 12(9) of CCPRRR). The draft RTS specify the content of the resolution plan in accordance with Article 12(7) of CCPRRR.
Final report containing guidelines for the methodology to value each contract prior to termination (Article 29(7) of the CCPRRR). The guidelines further specify the methodology to be used by the Member State resolution authority for determining the valuation of contracts prior to their termination as referred to in Article 29(1) of CCPRRR.
Final report containing draft RTS specifying the requirements for independent valuers, the methodology for assessing the value of the assets and liabilities of a CCP, the separation of the valuations, the buffer for additional losses to be included in provisional valuations and the methodology for carrying out the valuation for the purpose of the ‘no creditor worse off’ principle (Articles 25(6), 26(4) and 61(5) of CCPRRR).
Final report containing draft RTS on safeguards for clients and indirect clients (Article 63(2) of CCPRRR). The final report is delivered per the mandate given to the ESMA under Article 63 of CCPRRR which asks it to specify in a transparent manner, to the extent allowed by confidentiality of contractual arrangements, the conditions under which the passing on of compensation is required and the conditions under which it is to be considered proportionate.

The ESMA has submitted the final reports containing RTSs to the European Commission which now has three months to decide whether to endorse the proposed standards under a Delegated Regulation. The ESMA will translate the guidelines into all official languages of the EU.