15.11.2017   

EN

Official Journal of the European Union

C 385/3

1.1.

As the ECB has noted previously with regard to colleges, where the Eurosystem central banks, which together form the ‘central bank of issue’ for the euro, are represented in the college by the ECB or an NCB, and the prudential supervision of credit institutions that are significant CCP clearing members is performed by the ECB, separate votes should be attached to these two functions. On the same occasion, the ECB also stressed that these two functions are distinct, as is reflected in the legal and operational separation between the ECB’s monetary policy and prudential supervisory roles (6). Thus, the ECB strongly welcomes the fact that the proposed regulation addresses this issue, ensuring that separate votes are attached to these two functions.

1.2.

The ECB therefore welcomes the provisions of the proposed regulation amending the relevant provisions of Regulation (EU) No 648/2012. First, Article 18(2) of Regulation (EU) No 648/2012 is amended to set out that the college will, among others, comprise (a) the permanent members of the CCP Executive Session; (b) the competent authorities responsible for the supervision of the clearing members of the CCP which are established in the three Member States with the largest contributions to the default fund of the CCP, including, where relevant, the ECB in accordance with Council Regulation (EU) No 1024/2013 (7); and (c) the central banks of issue of the most relevant Union currencies of the financial instruments cleared. Second, Article 19(3) of Regulation (EU) No 648/2012 is amended to specify that where the ECB is a member of the college pursuant to the various points of Article 18(2) of the same Regulation, it will have a maximum of two votes in colleges up to and including 12 members; and a maximum of three votes for colleges with more than 12 members (8).

2.1.

The proposed regulation requires that the competent authorities must submit draft decisions regarding Union CCPs to the relevant central banks of issue before adopting any decision regarding the granting and withdrawal of authorisation, extension of services, and prudential requirements for liquidity risk controls, collateral requirements, settlement, and approval of interoperability arrangements (9). Competent authorities must obtain the consent of the central bank of issue in respect of any aspect of those decisions relating to the carrying out of their monetary policy tasks. Where the central bank of issue proposes amendments, the competent authority may only adopt the decision as amended; and where the central bank of issue objects to a draft decision, the competent authority may not adopt that decision. Likewise, the proposed regulation requires that with regard to recognised Tier 2 third-country CCPs, the European Securities and Markets Authority (ESMA) must submit draft decisions to the central bank of issue before adopting any decisions regarding liquidity risk controls, collateral requirements, settlement, approval of interoperability arrangements, as well as margin requirements (10). ESMA must likewise obtain the consent of the central bank of issue in respect of any aspect of those decisions relating to the carrying out of their monetary policy tasks. Where the central bank of issue proposes amendments, ESMA may only adopt the decision as amended; and where the central bank of issue objects to a draft decision, ESMA may not adopt that decision. The ECB strongly welcomes the role envisaged for the central banks of issue under the proposed regulation, which will enable the members of the ESCB to have meaningful and effective involvement in decision-making on matters of direct relevance to the fulfilment of the basic tasks of the ESCB under the Treaties, and the achievement of its primary objective of maintaining price stability. The ECB has a number of comments in this regard.

2.2.

First, where the proposed regulation clarifies that the consent of the central bank of issue must be obtained ‘in respect of any aspect of those decisions relating to the carrying out of their monetary policy tasks’, it should be emphasised that this phrase is intended to clarify the monetary policy context in which the central bank of issue carries out its role and the purpose the role fulfils. The same is true with regard to the reference to the compliance of third-country Tier 2 CCPs with any requirements of the central bank of issue ‘in the carrying out of their monetary policy tasks’ (11). This phrase should be read in conjunction with recital 7 of the proposed regulation. It should be emphasised that this phrase is not intended to grant discretion to the competent authorities or to ESMA to determine whether or not the consent of the central bank of issue should be sought on particular draft decisions, nor is it intended to grant discretion as to whether proposed amendments or objections to the draft decision by the central bank of issue are followed. In this respect, it should be noted that the Eurosystem enjoys broad discretion to define and implement monetary policy. This has been recognised by the Court of Justice of the European Union (12) and is imperative to ensure the independence of the ECB and NCBs, in accordance with Article 130 of the Treaty. In the interests of clarity and legal certainty, a new recital should be added to the proposed regulation to reflect this point.

2.3.

Second, with regard to which draft decisions should be subject to the consent of the central bank of issue, the ECB considers that the proposed regulation should ensure the involvement of the central bank of issue regarding certain further key aspects of CCP risk management. The ECB considers that in relation to both Union and third-country CCPs, the consent of the central bank of issue should also be required regarding draft decisions taken in respect of the CCP’s margin requirements (Article 41). This is important for the central bank of issue because of the crucial links between liquidity risk management, which is at the core of the central bank of issue’s focus, and the margin processes applied by a CCP. For example, the arrangements regarding intra-day margin collection have a significant effect on the CCP’s ability to obtain resources to meet its liquidity needs when they fall due. Margin processes and procedures, including rules regarding the adjustment of margin levels in times of market stress, can also have significant implications in terms of procyclicality: if improperly managed, they can create serious liquidity pressure on clearing members, potentially impairing the central bank of issue’s ability to implement its monetary policy objectives.

Moreover, the proposed regulation should provide that the consent of the central bank of issue is required for decisions regarding the review of models, stress testing and back testing for the validation of the models and parameters adopted by the CCP to calculate its margin requirements, default fund contributions, collateral requirements and other risk control measures under Article 49 of Regulation (EU) No 648/2012. This is important for the central bank of issue, because decisions under Article 49 may have direct consequences for the CCP’s compliance with the procedural and substantive requirements under Regulation (EU) No 648/2012 in relation to which the central bank of issue must otherwise give its consent. For example, a change to the CCP’s methodology for stress testing the adequacy of its collateral requirements would have a direct impact on the CCP’s observance of the obligations in relation to collateral under Article 46 of Regulation (EU) No 648/2012.

In the separate technical working document accompanying this opinion, the ECB sets out specific drafting proposals regarding the types of decisions on which the consent of the central bank of issue should be required.

2.4.

Third, the ECB notes that the competent authorities have a certain margin of appreciation as to whether changes proposed by a CCP should be subject to decisions under Article 15 of Regulation (EU) No 648/2012, with regard to the extension of activities and services not covered by the initial authorisation, or decisions under Article 49 with regard to the review of models, stress testing and back testing. If the competent authority considers that the changes proposed by CCPs do not comprise the extension of business to ‘additional services or activities’ or are not ‘significant changes’ to the models and parameters, such changes are not subject to decisions under Articles 15 and 49 respectively. In order to build a common Union supervisory culture and ensure consistent supervisory practices, ESMA recently published an opinion (13) on the common indicators for additional products and services under Article 15 and for significant changes under Article 49. The ECB takes the view that observance of the criteria set out in the ESMA opinion will be essential in order to ensure the consent of the relevant central banks of issue is sought in all cases where such consent is required. Thus, the ECB proposes that the guidance provided by ESMA regarding the interpretation of these articles should be made binding. To this end, ESMA should develop it as draft regulatory technical standards, which the Commission should then adopt in the form of a delegated act. For this purpose, the ECB sets out specific drafting proposals in the separate technical working document accompanying this opinion.

3.1.

The proposed regulation amends Article 21 of Regulation (EU) No 648/2012, to provide that the competent authorities, in cooperation with ESMA, will review the arrangements, strategies, processes and mechanisms implemented by CCPs to comply with Regulation (EU) No 648/2012, and evaluate the risks to which CCPs are, or might be, exposed. The amended Article 21 also provides that the CCPs will be subject to on-site inspections in which ESMA staff will be invited to participate. In addition, the competent authority is obliged to forward to ESMA any information received from the CCPs and to request from the relevant CCP any information sought by ESMA that it cannot provide.

3.2.

The review and evaluation process, as amended by the proposed regulation, will serve the key purpose of ensuring that CCPs comply with Regulation (EU) No 648/2012 on an ongoing basis. The ECB considers that the consultation of the central bank of issue in the review and evaluation process, where deemed necessary by the competent authority to ensure that the central bank of issue can fulfil its role under the proposed regulation, would be an important corollary to the requirements under Article 21a(2). The ability to contribute to the review carried out by competent authorities, in cooperation with ESMA, would enable the central bank of issue to ensure CCPs are not generating risks for the fulfilment of the basic tasks of the Eurosystem under the Treaties, and the achievement of its primary objective of maintaining price stability.

3.3.

In the separate technical working document accompanying this opinion, the ECB sets out specific drafting proposals regarding the consultation of the central bank of issue in the review and evaluation process under Article 21.

4.1.

It is worth recalling that Commission draft delegated and implementing acts qualify as ‘proposed Union acts’ within the meaning of Articles 127(4) and 282(5) of the Treaty. Both delegated and implementing acts constitute Union legal acts. The ECB should be consulted in due time on any draft Union acts, including draft delegated and implementing acts, falling within its fields of competence. The obligation to consult the ECB was clarified by the European Court of Justice in Commission v ECB  (14), with reference to the ECB’s functions and expertise. In light of the fact that safe and efficient financial market infrastructures, in particular clearing systems for financial instruments, are essential for the fulfilment of the basic tasks of the ESCB under Article 127(2) of the Treaty, and the pursuit of its primary objective of maintaining price stability under Article 127(1) of the Treaty, the ECB should be duly consulted on delegated and implementing acts adopted under Regulation (EU) No 648/2012. While the obligation to consult the ECB derives directly from the Treaty, in order to ensure clarity, this requirement should also be reflected in a recital of the proposed regulation. Having regard to the importance of delegated and implementing acts as part of the development of Union financial services legislation, the ECB will exercise its advisory role on matters within the ECB’s competence taking fully into account the timelines for adoption of these acts and the need to ensure the smooth adoption of implementing legislation (15).

4.2.

Moreover, in respect of a number of elements of the proposed regulation, in addition to the consultation of the ECB, the involvement, at an early stage, of the relevant members of the ESCB in the development of draft regulatory and implementing technical standards, delegated and implementing acts could be particularly useful, and should be specifically provided for.

4.3.

First, several provisions of the proposed regulation refer to the role of the central bank of issue. As noted in paragraph 2, these include situations where the consent of the central bank of issue is required for certain decisions taken by the competent authorities or by ESMA. Moreover, reference is made to situations where the central bank of issue must provide ESMA with written confirmation that a Tier 2 third-country CCP complies with any requirements imposed by that central bank of issue (16), and to where ESMA concludes, in agreement with the relevant central bank of issue, that a CCP is of ‘substantial systemic importance’ (17). In order to determine which central bank of issue should participate, the proposed regulation contains cross-references to Article 18(2)(h) of Regulation (EU) No 648/2012, which specifies that the college will consist of ‘the central banks of issue of the most relevant Union currencies of the financial instruments cleared’. The Commission is empowered to adopt a delegated act, on the basis of draft regulatory technical standards developed by ESMA, specifying the conditions under which the Union currencies referred to in Article 18(2)(h) are to be considered as the most relevant. Accordingly, in 2013 it adopted Commission Delegated Regulation (EU) No 876/2013 (18), which may now need to be revised and updated, to ensure the appropriate involvement of the central banks of issue of the currencies of the non-euro area Member States, taking into account the influence that disruptions in the functioning of CCPs may have on such currencies. The development of draft regulatory technical standards by ESMA for this purpose should be carried out in close cooperation with the relevant members of the ESCB. Furthermore, the delegated act should only be adopted after formal consultation of the ECB. The ECB also suggests that, in the interests of legal certainty, a cross-reference to Article 18(2)(h) of Regulation (EU) No 648/2012 should also be introduced in the provisions of the proposed regulation that refer only to the ‘relevant central bank of issue’.

4.4.

Second, the proposed regulation introduces a new Article 25(2a), which provides that ESMA will determine whether a third-country CCP is systemically important or likely to become systemically important for the financial stability of the Union or for one or more of its Member States, referred to as a ‘Tier 2 CCP’. It sets out the criteria that ESMA must take into account in making its determination and provides that the Commission will adopt a delegated act to further specify these criteria. In order to ensure the appropriate involvement of central banks of issue in the elaboration of the relevant criteria, the development of this delegated act by the Commission should be carried out in close cooperation with the relevant members of the ESCB.