|
|
What CCPs are subject to EMIR recognition procedure?
EMIR’s recognition procedure applies to all non-EU CCPs that provide clearing services to clearing members or trading venues established in the EU. Clearing members established in the EU, i.e. legal persons incorporated under the law of an EU Member State, will only be able to use non-EU CCPs if they have been recognised under EMIR.
As a consequence, EU clearing members accessing non-EU CCPs through local branches will only be able to continue to do so if those non-EU CCPs are recognised under EMIR. As EMIR only applies to entities established in the EU, this does not apply when EU banking groups access non-EU CCPs through local subsidiaries. In contrast to local branches, these local subsidiaries are not considered as EU clearing members.
This procedure applies to all types of CCP clearing services, irrespective of the type of financial products cleared. As a result, this procedure is not limited to CCPs clearing OTC derivatives.
What are the benefits of being recognised under EMIR?
First, non-EU CCPs recognised in the EU will be able to continue providing services to EU clearing members and trading venues whilst remaining exclusively subject to their domestic legal and supervisory framework. Recognition in the EU does not imply the application of any additional obligation under EU law. Under this approach, the EU fully relies on the application of domestic rules considered as equivalent to EU rules and their enforcement by domestic authorities. In order to guarantee a continuous access to information on the supervision of the CCP, cooperative arrangements (‘MoUs’) need to be established with domestic authorities.
Second, CCPs recognised in the EU will be able to benefit from the application of the clearing obligation in the EU. This is because EU counterparties subject to the clearing obligation will be obliged to use either CCPs authorised in the EU or non-EU CCPs recognised under EMIR to fulfil this obligation.
Third, EMIR recognition has implications on the capital treatment of EU banks’ exposures to CCPs under the new Basel III rules as transposed in the EU. Only non-EU CCPs recognised under EMIR will meet the conditions necessary to be considered as ‘qualified CCPs’. As capital requirements are applied to EU banks on a consolidated basis, this will have an impact on the exposures of branches or subsidiaries of EU banks to non-EU CCPs.
How does the EMIR recognition procedure work?
As provided in Article 25 of EMIR, a CCP established outside the EU may provide clearing services to EU clearing members where it has been recognised by the European Securities Markets Authority (ESMA). The main conditions for the recognition of a non-EU CCP by ESMA are:
(i) the European Commission has adopted a positive equivalence decision with regard to the regulatory framework applicable to CCPs in the CCP’s home country;
(ii) the CCP is authorised and subject to effective supervision and enforcement in its home country;
(iii) the CCP is established or authorised in a third country that is considered as having equivalent systems for anti-money-laundering and combating the financing of terrorism to those of the Union;
(iv) cooperation arrangements have been established between ESMA and the domestic supervisory authorities.
In practice, this means that two processes will need to be run in parallel. On the one hand, ESMA assesses the application for recognition received from non-EU CCPs, and establishes cooperation arrangements with domestic supervisory authorities. On the other hand, the European Commission prepares and adopts equivalence decisions for each foreign jurisdiction.
The adoption of an equivalence decision by the European Commission is by no means a precondition for an application for recognition by ESMA of a non-EU CCP. It is only a precondition to the adoption of a positive recognition decision by ESMA.
What is the process for the adoption of equivalence decisions?
The purpose of equivalence decisions is to verify that the supervisory framework applicable to CCPs in a third-country jurisdiction delivers equivalent results in terms of the soundness and efficiency of the supervision of CCPs. This assessment is not aimed at checking that rules identical to EU rules applicable to CCPs are in place in the third-country. The assessment is ‘outcome-focused’ and takes as much as possible account of the specificities of the regulatory context in the third-country.
For the preparation of equivalence decisions, the European Commission has asked ESMA to provide technical advice on the supervisory framework applicable in third-countries. Technical advice for a first set of countries are expected by 15 June 2013 and, for a second set of countries, by 15 September 20132. The content and the timing for the delivery of this advice neither prejudges the content of the equivalence decision nor of the timing of its adoption. It is not excluded that further advice could be requested from ESMA for additional countries, if necessary.