The European Commission is today proposing targeted reforms to further improve the financial stability of the European Union.
Central counterparties (CCPs) from the EU are already well regulated and equipped to deal with financial distress, thanks to a raft of measures adopted in the wake of the financial crisis. However, further reforms to ensure a more consistent and robust supervision of CCPs in EU and non-EU countries are now needed to deal with emerging challenges. CCPs have become a systemically-important part of the financial sector and their importance is growing. In addition, the foreseen withdrawal of the United Kingdom from the EU will have a significant impact on the regulation and supervision of clearing in Europe.
Valdis Dombrovskis, Vice-President responsible for Financial Stability, Financial Services and Capital Markets Union said: "The continued safety and stability of our financial system remains a key priority. As we face the departure of the largest EU financial centre, we need to make certain adjustments to our rules to ensure that our efforts remain on track."
Jyrki Katainen, Vice-President responsible for Jobs, Growth, Investment and Competitiveness said: "The Commission has worked hard to make our financial system safer. This proposal is a first concrete step after the recent adoption of our Mid-Term Review for Capital Markets Union to strengthen the effectiveness of supervision and to accelerate market integration."
The EU adopted the European Market Infrastructure Regulation (EMIR) in 2012 following the financial crisis to better manage and monitor the risks arising from derivatives markets to ensure financial stability. Given that these reforms increase the importance of CCPs for the EU's financial stability, today's proposal is a timely overhaul of the supervisory arrangements for CCPs established by EMIR. It complements the proposed amendments to EMIR, as well as the Commission proposal for CCP recovery and resolution.
Today's proposal is based on an assessment of the supervisory arrangements for CCPs, as well as on feedback from a series of public consultations, notably on the operations of the European Supervisory Authorities (ESAs) and on the Capital Markets Union (CMU) Mid-Term Review.It also considers feedback received following the publication of the Commission's Communication responding to challenges for critical financial market infrastructures.
The proposal introduces a more pan-European approach to the supervision of EU CCPs, to ensure further supervisory convergence and accelerate certain procedures. The proposal also ensures closer cooperation between supervisory authorities and central banks responsible for EU currencies. To achieve this, a newly-created supervisory mechanism will be established within European Securities and Markets Authority (ESMA) ('CCP Executive Session') which will be responsible for ensuring a more coherent and consistent supervision of EU CCPs as well more robust supervision of CCPs in non-EU countries, or 'third countries'.