Financial stability: Commission adopts final one-year extension of the transitional regime for capital requirements for non-EU central counterparties (CCPs)

(Credit: Unsplash)

This article is brought to you in association with the European Commission.


The European Commission has today extended – by one additional year –the current transitional regime regarding the capital requirements that EU banks and investment firms must maintain when exposed to non-EU central counterparties (‘CCPs’). This transitional regime will therefore continue to apply until 28 June 2022.

Mairead McGuinness, EU Commissioner responsible for financial services, financial stability and Capital Markets Union said, “Today’s decision gives us a bit more breathing space while we continue to work on equivalence decisions. It also gives EU banks and investment firms sufficient time to properly prepare for the possibility of higher capital charges. There will be no more extensions after today’s one.”

This is the last and final extension possible under the Capital Requirements Regulation (‘CRR’). Exposures to those non-EU CCPs which will not be recognised by ESMA by 28 June 2022 will no longer be eligible for lower capital requirements after that date. Stakeholders should start preparing for this possibility.

Background

CCPs operate between the counterparties of a derivatives contract. When a contract is centrally cleared, the CCP steps in and takes the place of the buyer to the seller, and the seller to the buyer. Following the financial crisis, their use was encouraged by the G20, as central clearing reduces risks in derivatives trading, notably the risk of contagion in case a counterparty defaults.

Under the CRR, EU CCPs and non-EU CCPs recognised by ESMA are considered to be ‘Qualifying CCPs’ (‘QCCPs’). EU banks and investment firms are subject to a significantly lower capital requirement for exposures to QCCPs compared to exposures to non-QCCPs.

At this time, a transitional regime under the CRR allows EU banks and investment firms to consider any non-EU CCP that has applied for recognition by ESMA as a QCCP during the recognition process. CCPs in Argentina, Chile, China, Colombia, Indonesia, Israel, Malaysia, Russia, Taiwan, Thailand and Turkey and the United States of America currently benefit from that transitional regime. Those CCPs have not been recognised by ESMA as the Commission has not adopted equivalence decisions for their home jurisdictions, or adopted such a decision only recently.

In the meantime, the Commission will continue its work on equivalence assessments. Nevertheless, the outcome of those assessments cannot be predicted and for various reasons there is no guarantee that the Commission will adopt equivalence decisions for all of these jurisdictions. An equivalence decision by the Commission is a prerequisite for ESMA to recognise a non-EU CCP. It is therefore possible that these non-EU CCPs, or some of them, will not be recognised by ESMA to provide clearing services in the EU.

the sting Milestones

Featured Stings

Can we feed everyone without unleashing disaster? Read on

These campaigners want to give a quarter of the UK back to nature

How to build a more resilient and inclusive global system

Stopping antimicrobial resistance would cost just USD 2 per person a year

EU and China to do more in common if the global scene gets worse

Click and Download: your app is ready to help you save lives

WHO reports ‘very strong progress’ in battling DR Congo Ebola outbreak

New Eurobarometer survey shows: The majority of Europeans think the EU should propose additional measures to address air quality problems

Public Health equality in a trench

10 ways cities are tackling the global affordable housing crisis

Germany tries to save Europe from war between Ukraine and Russia

Long-term EU budget: It is not possible to do more with less, say MEPs

UN chief saddened at news of death of former US President George H.W. Bush

End discrimination against women and children affected by leprosy

Drought in southern Africa: EU releases over €22 million in humanitarian aid

These tech start-ups are changing what it means to farm

Attack on Saudi facilities risks dragging Yemen into ‘regional conflagration’: UN Envoy

Celebrating the Customs Union: the world’s largest trading bloc turns 50

How to outsmart bias when you’re recruiting

Primary Healthcare vs Specialization Careers, how to promote PHC to the Young Health Workforce?

Haitian Foreign Minister calls for development reboot to close ‘striking gap’ between promises and action on ending poverty

This is how drones and other ‘tradetech’ are transforming international trade

European Democracy Action Plan: making EU democracies stronger

Why we need a blockchain bill of rights

Prospect of a nuclear war ‘higher than it has been in generations’, warns UN

Antitrust: Commission imposes binding obligations on Gazprom to enable free flow of gas at competitive prices in Central and Eastern European gas markets

How 3 MENA business leaders are building resilient companies post-COVID-19

Thousands of health professionals call on world leaders to prioritize a greener future, post-pandemic

Kenya wants to run entirely on green energy by 2020

COVID vaccination campaign. What are the challenges?

Greece bailout ends but with no substantial effect on citizens’ life

1 million citizens try to create a new EU institution

What the next 20 years will mean for jobs – and how to prepare

Statement by Frans Timmermans, Executive Vice-President for the European Green Deal, on the announcement to postpone the COP26

EU and US take decisive step to end aircraft dispute

How COVID-19 is making companies act for the long term

We need tech solutions that value human interaction more than ever

Grievous violations continue against Myanmar civilians, Human Rights Council hears

The West and Russia accomplished the dismembering and the economic destruction of Ukraine

Guterres lauds UN peacekeeping, highlights need to bridge ‘critical’ gaps

How cities are failing to be inclusive – and what they can do about it

We must stop turning a blind eye to the world’s health crises

London wants to treat violent crime like a disease

Cybersecurity Act: build trust in digital technologies

MasterCard @ MWC14: Innovation in times of regulatory uncertainty

The digital revolution will transform the steel industry

‘Protracted crisis’ in Venezuela leads to ‘alarming escalation of tensions’: UN political chief

From battlefields to boardrooms: 3 steps to building high-morale teams

‘Act now with ambition and urgency’ to tackle the world’s ‘grave climate emergency’, UN chief urges UAE meeting

African cooperation on peace ‘increasingly strong’, Security Council told

European Green Deal: Commission presents actions to boost organic production

State aid: Commission approves €790 million Croatian guarantee scheme for companies with export activities affected by coronavirus outbreak

How COVID-19 might help us win the fight against climate change

Civilians suffering due to sanctions must be spared ‘collective punishment’ urges UN rights expert

5 urgent actions in the fightback against ransomware

The UN came of age with the nuclear bomb. Time for it to step up to the AI era

How can we prepare students for the Fourth Industrial Revolution? 5 lessons from innovative schools around the world

How digital identity can improve lives in a post-COVID-19 world

How we measure stakeholder capitalism will determine our recovery

Commission disburses €14.1 billion under SURE to 12 Member States

How distorted is the EU labour market by this crisis?

UN study projects $32 billion loss for UK post no-deal Brexit

One for all? Are physicians prepared to deliver care to the LGBTQIA+ community?

Trade surplus up production down in Eurozone

More Stings?

Speak your Mind Here

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s