CCP recovery and resolution Panel 2 Global coordination, operational and legal issues. QED Conference Brussels, 2 March 2017

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1 CCP recovery and resolution Panel 2 Global coordination, operational and legal issues QED Conference Brussels, 2 March 2017

2 Disclaimer The views expressed during this presentation and panel discussion cannot be understood as representing the Commission's position on these issues and do not bind the Commission in any way. All errors remain those of the speaker. 2 March

3 Vice-President Dombrovskis speech at Bloomberg: Upholding a strong international financial system - London, 10 February 2017 "[ ] Our financial system is inherently international and [ ] financial stability cannot be achieved within national borders" "International finance needs international regulatory cooperation" "A common approach makes it safer and underpins the level-playing field we need for free trade, competition and growth" 2 March

4 1. Alignment with international work Reminder Scope of the EU proposal = all CCPs established in the Union and authorised under EMIR However, clearing activities are cross-border by nature Therefore, consistency with international guidance is essential The Commission has been (and will remain) actively involved in international regulatory fora (in particular, FSB and CPMI-IOSCO), fostering alignment between the proposal and existing/forthcoming international guidance It is not the end of the story, where needed and agreed, further adjustments remain possible through co-legislative procedure 2 March

5 Other key words Cooperation Preparation Information sharing Coordination 2 March

6 2. Pan-European resolution colleges Chaired by the 'home' authority of the CCP Membership based on existing EMIR supervisory colleges; thereby involving authorities of affected institutions, central banks as well as EBA and ESMA Key role in all preparatory phases (resolution plans, resolvability assessment and measures to remove impediments to resolvability) Coordination and preparation are essential relevant third country authorities may be invited by the Chair as observers 2 March

7 3. Third countries (similar to BRRD) Facilitating enforcement through contractual recovery arrangements and recognition clauses (i.e. rulebooks). International agreements to be negotiated by the Commission. This is without prejudice to bilateral arrangements in the interim. As a principle, recognition of third-country resolution proceedings (without prejudice to the normal insolvency proceedings under national laws). However, recognition or enforcement of third-country resolution proceedings may be refused under the following circumstances: Adverse effects on financial stability; Asymmetric treatment with the third-country home resolution proceedings; Material fiscal implications; Contrary to applicable national laws. ESMA guidance will form the basis for bilateral or multilateral cooperation arrangements. 2 March

8 The need to strike a balance Recovery & Resolution 2 March

9 4. A balanced approach to recovery and resolution Recovery plans should be part of the rulebook ('operating rules'); involvement of clearing participants and Risk Committee in their design Clearing members should inform their clients of the costs and effects of recovery measures Resolution is based on the usual CCP's risk management and recovery tools, accepted internationally Constrained flexibility for the resolution authority Resolution objectives (continuity of critical functions, financial stability, public interest) and general principles for resolution (incl. hierarchy of losses) Resolution College (preparatory phase and 'ex post' justification for deviations) Safeguards (incl. NCWO) Independent valuation (incl. NCWO counterfactual) 2 March

10 2 March