As part of the measures of the CMU clearing package, published on 7 December 2022, the ABBL welcomes the efforts of the European Commission on increasing the competitiveness of the European central clearing framework (CCP).
3 impacts have been identified so far for our members.
Impact 1: active accounts
The new obligation for banks (financial counterparties):
- to have directly or indirectly an active account with an EU CCP
- to clear at least part of the transactions on derivatives subject to the clearing obligation in this EU CCP.
The calibration of the activity and the precise definition of the proportion of derivatives to be cleared and held through active accounts will be crucial in assessing the "potential" full transfer of activity to an EU CCP in terms of economic feasibility and benefits to counterparties. The ESAs will determine, through a regulatory technical standard (RTS), the proportion of derivatives to be cleared via active accounts.
Impact 2 : reporting requirement
Another impacting point will be the reporting requirements for clearing members and clients established in the EU, or part of a group, subject to consolidated supervision in the EU and clearing in a recognised third country CCP. They will have to report to their national competent authority on the scope of their clearing activity in such CCP. This reporting will be set by regulatory technical standards and developed by the ESAs.
As a result, it will be necessary to assess and implement the report requirements and the expansion of the scope of data to be captured, which will increase costs for financial counterparties.
Impact 3 : CRD
Amendements to the CRD have been proposed with the aim at monitoring banks' concentration risks towards third country CCPs, which would empower competent authorities to require the reduction of banks exposures towards such CCPs.
Among others, this topic is addressed in the Working Group "Market Infrastructures" and related to the Financial Markets and Intermediation Committee (FMIC).
For any further information on the subject or if you would like to join the working the group, please feel to reach out to Marilyn Rinck, Financial Markets Adviser.
By Marilyn Rinck