(1)

Article 25d of Regulation (EU) No 648/2012 requires that the European Securities and Markets Authority (‘ESMA’) charge third-country central counterparties (‘CCPs’) fees associated with applications for recognition under Article 25 of that Regulation and annual fees associated with the performance of its tasks in accordance with that Regulation in relation to recognised third-country CCPs. Article 25d(2) of Regulation (EU) No 648/2012 requires that such fees be proportionate to the turnover of the CCP concerned and cover all costs incurred by ESMA for the recognition and the performance of its tasks in relation to third-country CCP in accordance with that Regulation.

(2)

Fees associated with applications for recognition (‘recognition fees’) should be charged to third-country CCPs to cover ESMA’s costs for processing applications for recognition, including costs for verifying that applications are complete, requesting additional information, drafting of decisions and costs relating to the assessment of the systemic importance of third-country CCPs (‘tiering’). For CCPs that are systemically important or likely to become systemically important for the financial stability of the Union or of one or more of its Member States and that are recognised by ESMA in accordance with Article 25(2b) of Regulation (EU) No 648/2012 (‘Tier 2 CCPs’), additional costs are incurred by ESMA. These additional costs are incurred by ESMA when assessing compliance with the recognition conditions set out in Article 25(2b) of Regulation (EU) No 648/2012 and whether, by complying with the applicable third-country legal framework, a CCP may be deemed to satisfy compliance with the requirements set out in Article 16 and Titles IV and V of Regulation (EU) No 648/2012 (‘comparable compliance’). The costs associated with applications made by Tier 2 CCPs will therefore be higher than those associated with applications made by third-country CCPs that are not deemed to be systemically important or likely to become systemically important for the financial stability of the Union or of one or more of its Member States (‘Tier 1 CCPs’).

(3)

While a basic recognition fee should be charged to all third-country CCPs applying for recognition under Article 25 of Regulation (EU) No 648/2012, an additional fee should be charged to Tier 2 CCPs to cover the additional cost incurred by ESMA as part of the application process. The additional recognition fee should also be charged to already recognised CCPs the first time that ESMA determines whether they are to be classified as Tier 2 CCPs following the review of their systemic importance under Article 25(5) or Article 89(3c) of Regulation (EU) No 648/2012.

(4)

Annual fees are also to be charged to recognised third-country CCPs to cover ESMA’s costs for the performance of its tasks under Regulation (EU) No 648/2012 in relation to such CCPs. For both Tier 1 and Tier 2 CCPs, those tasks include the periodic review of the systemic importance of CCPs pursuant to Article 25(5) of Regulation (EU) No 648/2012, the implementation and maintenance of cooperation arrangements with third-country authorities and the monitoring of regulatory and supervisory developments in third countries. For Tier 2 CCPs, ESMA is also required to supervise on an ongoing basis compliance by those CCPs with the requirements set out in Article 16 and Titles IV and V of Regulation (EU) No 648/2012, including through comparable compliance, where granted. It is therefore appropriate that different annual fees apply to Tier 1 and Tier 2 CCPs.

(5)

The recognition and annual fees laid down in this Regulation should cover the costs that ESMA expects to incur when processing applications for recognition on the basis of its experience in performing tasks in relation to third-country CCPs and other supervised entities as well as on the basis of its expected costs as stated in its annual activity-based budget.

(6)

The tasks performed by ESMA under Regulation (EU) No 648/2012 in relation to recognised Tier 1 CCPs will largely be the same for each Tier 1 CCP independently of their size. It is therefore appropriate that the costs incurred by ESMA in relation to recognised Tier 1 CCPs are covered by levying an annual fee of the same amount on each recognised Tier 1 CCP. In relation to recognised Tier 2 CCPs, in order to ensure a fair allocation of fees which, at the same time, reflects the actual administrative effort required by ESMA for the performance of its tasks with respect to each Tier 2 CCP, annual fees should also take account of the turnover of the Tier 2 CCP.

(7)

Annual fees charged to third-country CCPs for the first year in which they are recognised pursuant to Article 25 of Regulation (EU) No 648/2012 should be proportionate to the part of that year during which ESMA performs tasks in accordance with that Regulation in relation to those CCPs. The same principle should apply for the year in which a CCP that is recognised as a Tier 1 CCP, is classified for the first time as a Tier 2 CCP pursuant to Article 25(5) of that Regulation.

(8)

To ensure the timely funding of the costs incurred by ESMA in relation to applications for recognition made pursuant to Article 25 of Regulation (EU) No 648/2012, recognition fees should be paid to ESMA before the processing of applications for recognition or the assessment of whether Tier 2 CCPs comply with the recognition requirements set out in Article 25(2b) of Regulation (EU) No 648/2012. In order to ensure the timely funding of the costs incurred by ESMA in the performance of its tasks in relation to recognised third-country CCPs, annual fees should be paid in the beginning of the calendar year to which they relate. Annual fees in the first year of recognition should be paid soon after the adoption of recognition decisions.

(9)

In order to discourage repeated or unfounded applications, recognition fees should not be reimbursed in the case where an applicant withdraws its application. As the administrative work required in the case of an application for recognition that is refused is the same as that required in the case of an application that is accepted, recognition fees should not be reimbursed if recognition is refused.

(10)

Any costs incurred by ESMA after the entry into force of Regulation (EU) 2019/2099 of the European Parliament and of the Council (2) in respect of third-country CCPs that have already been recognised in accordance with Article 25 of Regulation (EU) No 648/2012 prior to 22 September 2020 should be covered by fees. Such third-country CCPs should therefore be required to pay an interim annual fee for 2020 and each subsequent year until the review of their systemic importance pursuant to Article 89(3c) of Regulation (EU) No 648/2012 has been carried out.

(11)

This Delegated Regulation should enter into force as a matter of urgency to ensure that ESMA is funded in a timely and appropriate manner following the entry into force of Regulation (EU) 2019/2099,

(1)

When assessing the degree of systemic risk that a third-country CCP presents to the financial stability of the Union or of one or more of its Member States, ESMA should consider a range of objective quantitative and qualitative considerations that justify its decision to recognise a third-country CCP as a Tier 1 or a Tier 2 CCP. It should also take into account any conditions under which the Commission may have adopted its equivalence decision. In particular, when assessing the risk profile of a third-country CCP, ESMA must consider objective and transparent quantitative activity indicators with regard to the business conducted with respect to clearing participants established in the Union or denominated in Union currencies, at the time of the assessment. While ESMA must consider the business conducted by the CCP in a holistic manner, its assessment should reflect the risk that a particular CCP could bring to the financial stability of the Union.

(2)

In specifying the criteria that ESMA is to take into account when determining the tier of a third-country CCP, the nature of the transactions cleared by the CCP, including their complexity, risk profile and average maturity, as well as the transparency and liquidity of the markets concerned and the degree to which the CCP’s clearing activities are denominated in euro or other Union currencies should be considered. In this regard, specific features concerning certain products, such as agricultural products, listed and executed on regulated markets in third countries, which relate to markets that largely serve domestic non-financial counterparties in that third country who manage their commercial risks through those contracts, may pose a negligible risk to clearing members and trading venues in the Union as they have a low degree of systemic interconnectedness with the rest of the financial system.

(3)

The countries where the CCP operates, the extent of the services it provides, the characteristics of the financial instruments it clears as well as the volumes cleared are objective indicators of the complexity of the CCP’s business. When taking into account the criterion set out in point (a) of Article 25(2a) of Regulation (EU) No 648/2012, ESMA should therefore consider the ownership, business and corporate structure of the CCP, as well as the range, nature and complexity of clearing services offered by the CCP and the extent to which those services are of importance to clearing members and clients (‘clearing participants’) established in the Union. While the systemic importance of a CCP should be assessed in a holistic way, ESMA should take specific account of the proportion of the business of the CCP conducted in Union currencies, as well as the proportion of the business of the CCP originated from clearing participants established in the Union. For a CCP more likely to be of systemic importance to the Union it is important that ESMA assesses the structure and ownership of the group of which the CCP might be part in order to determine whether the interests of the Union are at risk. Additionally, the depth, liquidity and transparency of the markets served by such a CCP should also be assessed so that ESMA can better grasp the risk to clearing members established in the Union in the conduct of a default management auction.

(4)

The capital of the CCP and the financial resources committed by clearing participants as well as the type and nature of the collateral that they provide, are essential elements to be considered when assessing the capacity of a CCP to withstand any adverse development. When taking into account the criterion set out in point (b) of Article 25(2a) of Regulation (EU) No 648/2012, ESMA should therefore have an overview of the financial resources available to the CCP in case of a default or a non-default event. ESMA should also consider the secured, unsecured, committed, uncommitted, funded or unfunded nature of these resources as well as the means used by the CCP to provide legal certainty and confidence as to the settlement of the payments it effects and the collateral it has to deal with. Finally, ESMA should consider the existence, nature and effect of a recovery and resolution framework for CCPs in the jurisdiction the CCP applying for recognition operates. Such recovery and resolution frameworks should be assessed against internationally agreed guidance and key attributes. When looking at settlement and liquidity risk, ESMA should pay particular attention for those CCPs that are likely to be systemic on how securely those CCP access liquidity as well as the liquidity strains on Union currencies. While the safety of payments and settlements might be reinforced through the use of distributed ledger technology or other recent technologies, ESMA should pay attention to the additional risk it may bring to the CCP, in particular cyber risk.

(5)

The nature of the conditions imposed by a CCP in order for clearing participants to access its services and the interlinkages between those clearing participants have repercussions on the way a CCP may be affected by an adverse event in relation to those participants. Therefore, when taking into account the criterion set out in point (c) of Article 25(2a) of Regulation (EU) No 648/2012, ESMA should determine to the extent possible the identity of clearing participants to the CCP, in particular where that CCP provides services to clearing participants established in the Union. ESMA should also determine the relevant market share or relative importance of clearing participants or groups of clearing participants in that CCP. Insofar as necessary to assess the impact it might have on the clearing membership structure, ESMA should assess the conditions and options under which the CCP provides access to its clearing services. With respect to a CCP that is likely to be systemic to the Union, ESMA should assess whether the legal and prudential requirements that a CCP imposes on its clearing members are sufficiently stringent.

(6)

In the event of a disruption to a CCP, clearing participants may have to rely, whether directly or indirectly, on the provision by other CCPs of similar or identical services. In order to assess the relative importance of the CCP applying for recognition, ESMA should therefore, when taking into account the criterion set out in point (d) of Article 25(2a) of Regulation (EU) No 648/2012, determine whether clearing participants may substitute some or all of the clearing services provided by that CCP with services provided by other CCPs, in particular where those alternative CCPs are authorised or recognised in the Union. Where clearing members and clients established in the Union can only clear certain products subject to a clearing obligation in one third-country CCP, the systemic importance of that CCP should be considered with acute attention by ESMA.

(7)

CCPs may be connected in many ways to other financial infrastructures such as other CCPs or central securities depositaries. A disruption those connections may adversely affect the good functioning of the CCP. Therefore, when taking into account the criterion set out in point (e) of Article 25(2a) of Regulation (EU) No 648/2012, ESMA should assess the extent to which the CCP is connected with other financial market infrastructures or financial institutions in a way that could impact the financial stability of the Union or of one or more of its Member States. In doing this ESMA should give particular attention to those connections and interdependencies with entities located in the Union. Finally, ESMA should identify and assess the nature of the services outsourced by the CCP and the risk such arrangements might pose to the CCP in case they were to be interrupted or impaired in any way.

(8)

Where, as determined using objective quantitative indicators, the exposure of clearing members and clients established in the Union to a CCP is significant, ESMA should assess additional elements for each criterion. The more of those indicators are met by a CCP, the greater the likelihood that ESMA concludes that that CCP is of systemic importance for the financial stability of the Union or of one or more of its Member States.

(9)

This Delegated Regulation should enter into force as a matter of urgency to ensure the fastest operationalisation of Regulation (EU) 2019/2099 (2) of the European Parliament and of the Council,

(1)

According to Article 25a of Regulation (EU) No 648/2012, a third-country central counterparty (CCP) that is systemically important or likely to become systemically important for the financial stability of the Union or one or more of its Member States (Tier 2 CCP) may request the European Securities and Markets Authority (ESMA) to assess whether that Tier 2 CCP’s compliance with the applicable third-country framework may be deemed to satisfy compliance with the requirements set out in Article 16 and in Titles IV and V of Regulation (EU) No 648/2012 (comparable compliance), and to adopt a decision accordingly.

(2)

Comparable compliance preserves the financial stability of the Union and ensures a level-playing field between Tier 2 CCPs and CCPs authorised in the Union while reducing administrative and regulatory burdens for those Tier 2 CCPs. The assessment of comparable compliance should, therefore, verify whether a Tier 2 CCP’s compliance with the third-country framework effectively satisfies compliance with any or all requirements set out in Article 16, Title IV and V of Regulation (EU) No 648/2012. This Regulation should therefore indicate the elements to be assessed by ESMA when assessing a Tier 2 CCP’s request for comparable compliance. When conducting that assessment, ESMA should also consider that CCP’s compliance with any requirements in delegated or implementing acts that further specify those elements, including those requirements related to margin requirements, liquidity risk controls, and collateral requirements.

(3)

In its assessment of whether compliance with the applicable third-country framework satisfies compliance with the requirements set out in Article 16, Title IV and V of Regulation (EU) No 648/2012, ESMA might also consider the recommendations developed by the Committee on Payments and Market Infrastructures and the International Organization of Securities Commissions.

(4)

ESMA should conduct a detailed assessment to determine whether to grant a Tier 2 CCP comparable compliance for Title IV of Regulation (EU) No 648/2012. Any potential refusal of comparable compliance with respect to that Title IV might impact the equivalence assessment conducted by the Commission pursuant to Article 25(6) of that Regulation. ESMA should therefore inform the Commission where it intends not to grant comparable compliance with respect to that Title.

(5)

Where a Tier 2 CCP has entered into an interoperability arrangement with a CCP authorised under Article 14 of Regulation (EU) No 648/2012, that arrangement constitutes a direct link and, therefore, a direct channel of contagion, to a CCP in the Union. For such arrangements, ESMA should conduct a detailed assessment to determine whether to grant comparable compliance for Title V of that Regulation. An interoperability arrangement between a Tier 2 CCP and another third-country CCP does not constitute a direct link to a CCP in the Union but might, under certain circumstances, function as an indirect channel of contagion. For such arrangements, ESMA should only conduct a detailed assessment where the impact of that arrangement on the financial stability of the Union or one or more of its Member States justifies it.

(6)

Since one of the objectives of comparable compliance is to reduce administrative and regulatory burden for Tier 2 CCPs, comparable compliance should not be refused only because a Tier 2 CCP applies, under the applicable third-country framework, exemptions that are comparable to those set out in paragraphs 4 and 5 of Article 1 of Regulation (EU) No 648/2012. The assessment of comparable compliance should also take into account the extent to which not granting it may result in the impossibility for the Tier 2 CCP to comply with both Union and third-country requirements at the same time.

(7)

ESMA’s decision on whether to grant comparable compliance should be based on the assessment conducted at the time of the adoption of that decision. In order for ESMA to reassess its decision whenever relevant developments, including changes to a CCP’s internal rules and procedures occur, the Tier 2 CCP should notify ESMA of any such developments.

(8)

Regulation (EU) 2019/2099 of the European Parliament and of the Council (2), which inserted Article 25a into Regulation (EU) No 648/2012, started to apply on 1 January 2020. To ensure that that article is fully operational, this Regulation should enter into force as a matter of urgency,

(1)

Article 129(1) of the Agreement on the withdrawal of the United Kingdom of Great Britain and Northern Ireland from the European Union and the European Atomic Energy Community (2) (‘the Withdrawal Agreement’) provides that, during the transition period, the United Kingdom is to be bound by the obligations stemming from the international agreements concluded by the Union, by Member States acting on its behalf, or by the Union and its Member States acting jointly.

(2)

Article 129(3) of the Withdrawal Agreement provides that, in accordance with the principle of sincere cooperation, the United Kingdom is to refrain, during the transition period, from any action or initiative which is likely to be prejudicial to the Union’s interests, in particular in the framework of any international organisation, agency, conference or forum of which the United Kingdom is a party in its own right.

(3)

Pursuant to Article 129(4) of the Withdrawal Agreement, during the transition period, the United Kingdom may negotiate, sign and ratify international agreements entered into in its own capacity in the areas of exclusive competence of the Union, provided that those agreements do not enter into force or apply during the transition period, unless so authorised by the Union.

(4)

Decision (EU) 2020/135 sets out the conditions and procedure for granting such authorisations.

(5)

Pursuant to Article 3(1) of Decision (EU) 2020/135, the Council may authorise the United Kingdom to express its consent, in its own capacity, to be bound by an international agreement intended to enter into force or be applied during the transition period, in an area of exclusive competence of the Union.

(6)

On 3 April 2020, the United Kingdom notified the Commission of its intention to express its consent, in its own capacity, to be bound by five international agreements establishing five regional fisheries management organisations (RFMOs), intended to be applied during the transition period, in the area of the Union's exclusive external competence on fisheries. Those agreements are: the Convention on Future Multilateral Cooperation in the North-East Atlantic Fisheries (3) establishing the North-East Atlantic Fisheries Commission (NEAFC); the Convention on Future Multilateral Cooperation in the Northwest Atlantic Fisheries (4) establishing the Northwest Atlantic Fisheries Organization (NAFO); the International Convention for the Conservation of Atlantic Tunas (5) establishing the International Commission for the Conservation of Atlantic Tunas (ICCAT); the Agreement for the establishment of the Indian Ocean Tuna Commission (6) (IOTC); and the Convention for the Conservation of Salmon in the North Atlantic Ocean (7) establishing the North Atlantic Salmon Conservation Organization (NASCO).

(7)

The United Kingdom justifies its interest in acceding to those agreements during the transition period in light of Articles 63 and 64 of the United Nations Convention on the Law of the Sea (8) (UNCLOS) and Articles 7 and 8 of the United Nations Agreement on the implementation of the provisions of the United Nations Convention on the Law of the Sea of 10 December 1982 relating to the conservation and management of straddling fish stocks and highly migratory fish stocks (9) (UNFSA), in particular the obligations of the Union and of the United Kingdom to cooperate through appropriate regional organisations in the conservation and management of shared stocks. The United Kingdom considers that neither it nor the Union can give full effect to those obligations unless the United Kingdom is able during the transition period to cooperate independently with the Union and other relevant States on matters affecting the United Kingdom as an independent coastal State and fishing State after the end of the transition period. The United Kingdom thus wants to participate in discussions during the transition period on fisheries management decisions that would take effect after the end of the transition period.

(8)

By means of its letter of 3 April 2020, the United Kingdom has demonstrated a specific interest in the international agreements in question already applying during the transition period. Therefore, the condition set out in point (a) of Article 3(1) of Decision (EU) 2020/135 is fulfilled.

(9)

The five international agreements in question are compatible with Union law applicable to and in the United Kingdom in accordance with Article 127(1) of the Withdrawal Agreement and with the obligations referred to in Article 129(1) of the Withdrawal Agreement. Therefore, the condition set out in point (b) of Article 3(1) of Decision (EU) 2020/135 is fulfilled.

(10)

The United Kingdom also confirmed that its accession to those international agreements establishing RFMOs would not be prejudicial to the Union’s interests. The United Kingdom only intends to participate in meetings on issues that concern matters having effect after the end of the transition period. In particular, the United Kingdom’s membership in those RFMOs in its own capacity, during the transition period, does not put at risk the attainment of the objectives of the Union's external action in the area of the common fisheries policy and is not otherwise prejudicial to the Union’s interests. Therefore, the condition set out in point (c) of Article 3(1) of Decision (EU) 2020/135 is fulfilled.

(11)

Pursuant to Article 3(2) of Decision (EU) 2020/135, such authorisation may be conditional. The authorisation should be granted provided that the United Kingdom participates only in matters to be applied or take effect after the end of the transition period.

(12)

The United Kingdom is bound by the obligations resulting from UNCLOS and UNFSA and consequently has to manage and conserve marine living resources in a sustainable manner. Those objectives are in line with the Union's objective of ensuring sustainability and of securing continued responsible fisheries that ensures the long-term conservation and sustainable exploitation of marine biological resources.

(13)

Therefore, in accordance with Article 129(4) of the Withdrawal Agreement, during the transition period, the United Kingdom can sign and ratify in its own capacity the five international agreements underlying the five RFMOs to which it seeks accession. This would facilitate and enable the United Kingdom to give full effect to the obligations resulting from UNCLOS, in particular Articles 63 and 64 thereof, at the moment the transition period ends and Union law ceases to apply to it.

(14)

The United Kingdom should therefore be authorised to express its consent, in its own capacity, to be bound by the international agreements intended to be applied during the transition period.

(15)

In order to ensure the good functioning of the Union’s common fisheries policy during the transition period, the United Kingdom should not participate in matters applied or taking effect during the transition period. Moreover, in order not to prejudice the ongoing negotiations on fisheries in the context of the future partnership agreement between the Union and the United Kingdom, in particular as regards fishing opportunities for which the Union's quota currently includes the share of the United Kingdom, the United Kingdom should enter into consultation with the Union prior to discussing such quota,

(1)

The Basel III framework introduced a simple, transparent, non-risk-based leverage ratio to act as a credible supplementary measure to the risk-based capital requirements. The leverage ratio standard published by the Basel Committee on Banking Supervision (BCBS) in December 2017 (hereinafter referred to as the ‘BCBS standard on the leverage ratio’) provides that in order to facilitate the implementation of monetary policies, a jurisdiction may, at its discretion, temporarily exempt central bank reserves from the leverage ratio exposure measure in exceptional macroeconomic circumstances.

(2)

The BCBS standard on the leverage ratio was first implemented in Union legislation by Regulation (EU) No 575/2013. Article 430 of Regulation (EU) No 575/2013 requires institutions to report to the competent authorities certain information on their leverage ratio and its components, while Article 451 of that Regulation requires institutions to disclose certain information regarding their leverage ratio and their management of the risk of excessive leverage.

(3)

Regulation (EU) No 575/2013 was amended by Regulation (EU) 2019/876 of the European Parliament and of the Council (3), inter alia, to reflect revisions that were made to the BCBS standard on the leverage ratio so as to ensure a level playing field internationally for institutions established inside the Union but operating outside the Union, and to ensure that the leverage ratio remains an effective complement to risk-based own funds requirements. Regulation (EU) 2019/876 introduced a leverage ratio requirement to complement the system of reporting and disclosure of the leverage ratio. That Regulation also introduced the possibility of temporarily excluding certain exposures to central banks from the calculation of an institution’s total exposure measure in exceptional circumstances and in order to facilitate the implementation of monetary policies. These amendments to the leverage ratio framework, including the discretion to exclude certain exposures to central banks from the total exposure measure, will become applicable on 28 June 2021.

(4)

Regulation (EU) No 575/2013 has since been further amended by Regulation (EU) 2020/873 of the European Parliament and of the Council (4), inter alia, to provide for the possibility of temporarily excluding certain exposures to central banks from the calculation of an institution’s total exposure measure before 28 June 2021 – that is, before the amendments to the leverage ratio requirement that were introduced by Regulation (EU) 2019/876 become applicable. In particular, Article 500b of Regulation (EU) No 575/2013 permits an institution to exclude certain exposures to the institution’s central bank from the total exposure measure where the institution’s competent authority has determined, after consultation with the relevant central bank, and publicly declared that exceptional circumstances exist that warrant the exclusion in order to facilitate the implementation of monetary policies. Article 500b of Regulation (EU) No 575/2013 has applied since 27 June 2020.

(5)

While financial markets have stabilised since April 2020, financing conditions in the euro area are tighter than at the beginning of the year, on account of higher bond yields and lower equity prices. The situation brought about by the coronavirus (COVID-19) pandemic, as well as the resulting and continued need for a high degree of monetary policy accommodation, and the fragility and vulnerabilities of the euro area economies and of the bank-based transmission channel of monetary policy, all justify the view of the Governing Council of the European Central Bank (ECB) that exceptional circumstances exist that warrant the temporary exclusion until 27 June 2021 of certain exposures to Eurosystem central banks from the calculation of institutions’ total exposure measures in order to facilitate the implementation of monetary policies, for the purposes of Article 500b of Regulation (EU) No 575/2013.

(6)

The exposures that may be excluded comprise coins and banknotes constituting legal currency in the jurisdiction of the central bank and assets representing claims on the central bank – including reserves held at the central bank – insofar as these exposures are relevant for the transmission, and therefore, implementation of monetary policy. Such exposures include deposits held in the deposit facility and balances held on reserve accounts with the Eurosystem, including funds held in order to meet minimum reserve requirements. Exposures representing claims on the central bank that are not related to the implementation of monetary policy should not be excluded from the total exposure measure.

(7)

It is expected that the exclusion under Article 500b of Regulation (EU) No 575/2013 until 27 June 2021 of certain central bank exposures from the total exposure measure would support credit institutions in continuing to fulfil their role in funding the real economy, while preserving the key elements of the prudential regulatory framework. The exclusion may reduce potential constraints linked to the introduction of a new requirement for own funds and eligible liabilities that was implemented in the Union as an amendment to Regulation (EU) No 575/2013 by Regulation (EU) 2019/876 in order to reflect the Total-Loss-absorbing Capacity standard, and that has been applicable since 28 June 2019. Furthermore, although the leverage ratio will not apply until 28 June 2021, the exclusion of certain central bank exposures from the total exposure measure until then could be beneficial from the perspective of clear communication of financial information. In particular, institutions would be able to disclose their leverage ratio both with and without the impact of excluded exposures. This information could be useful for financial market participants in assessing the potential future leverage ratios of institutions once the leverage ratio becomes applicable on 28 June 2021.

(8)

The ECB, in its monetary policy function, was consulted in accordance with Article 500b(2) of Regulation (EU) No 575/2013 on the determination of exceptional circumstances warranting the exclusion pursuant to Article 500b(1) of that Regulation (5),

(1)

The COVID-19 crisis has shown that connectivity is essential for people and businesses in the Union. Electronic communications networks, in particular very high capacity networks, have been playing a crucial role in the response to the crisis by enabling remote working and schooling, healthcare, and personal communication and entertainment. Widespread gigabit connectivity underpins bandwidth-intensive use cases in the fields of health, education, transport, logistics, and media, which can play a key role in Europe’s economic recovery. More generally, fixed and wireless connectivity contributes significantly to providing affordable and accessible services and bridging the digital divide. It offers an important means to inform the public, help relevant public authorities contain the spread of the virus and enable healthcare organisations to exchange data and to provide teleservices.

(2)

The pandemic has changed the economic outlook for the years to come. Investment and reforms are needed more than ever to ensure convergence and a balanced, forward-looking and sustainable economic recovery. Investing in the Union’s common priorities, notably in the areas of green, digital and social policies, will improve its resilience and help create jobs and sustainable growth, while modernising Member States’ economies. Member States should therefore fully exploit the potential of the proposed recovery and resilience facility, ensuring efficient public spending and creating the conditions best suited for private investment. To that end, this Recommendation gives guidance to Member States who are in the process of designing their proposals for their recovery and resilience plans. It indicates how Member States can deploy simple and realistic measures to assign radio spectrum for the fifth generation (5G) networks under investment-friendly conditions, and how they can facilitate the deployment of very high capacity fixed and wireless networks by, for example, removing unnecessary administrative hurdles and streamlining permit granting procedures.

(3)

In this socio-economic context, it is necessary to develop a common Union approach, a ‘Toolbox’, based on best practices. The aim is to incentivise the timely deployment of very high capacity networks, including fibre and next generation wireless networks. Such approach would support emerging and future digital processes and applications, and contribute directly to growth and employment, as part of the Union’s economic recovery.

(4)

The Council Conclusions on Shaping Europe’s Digital Future of 9 June 2020 (1) stress that the COVID-19 pandemic has demonstrated the need for fast and ubiquitous connectivity. This situation calls on Member States, in close cooperation with the Commission, to develop a set of best practices to reduce the costs of network deployment and facilitate the roll-out of very high capacity infrastructures, including fibre and 5G.

(5)

5G mobile networks will bring very high capacity connectivity to mobile users. These networks are set to play a vital role in laying the basis for the digital and green transformations in areas like transport, energy, manufacturing, health, agriculture and media. The success of a number of use cases for 5G requires service continuity in substantial territories, including across national borders. It is therefore important that Member States take appropriate steps to promote deployment throughout their territories, including rural and remote areas, and cooperate with each other in the deployment of 5G in cross-border areas.

(6)

The spectrum-related actions covered by this Recommendation may support the preparation of the future Commission’s updated action plan for Europe on 5G and 6G that is announced in the Commission’s Communication ‘Shaping Europe’s digital future’ (2). That updated plan would take stock of progress made, address current network deployment deficiencies and set a new level of ambition for future 5G deployment at EU level, to ensure that 5G connectivity will realise its full potential to help meet the EU’s longer-term goals for the digital transformation of the economy.

(7)

Directive 2014/61/EU of the European Parliament and of the Council (3) (‘the Broadband Cost Reduction Directive’) aims to facilitate and incentivise the roll-out of high-speed electronic communications networks. In its report on the implementation of the Broadband Cost Reduction Directive (4), the Commission identified a number of problems in terms of its effectiveness, including the fact that some optional measures are not being used to their full potential by Member States. In response, this Recommendation should propose measures to incentivise the timely deployment of sustainable very high capacity electronic communications networks, including 5G networks.

(8)

Directive (EU) 2018/1972 of the European Parliament and of the Council (5), which has to be transposed by Member States and applied from 21 December 2020, promotes connectivity and access to, and take-up of, very high capacity networks by all citizens and businesses of the Union. This Recommendation is intended to contribute to the achievement of this objective and hence focuses on the deployment of very high capacity networks.

(9)

Member States should cooperate with each other and with the Commission to urgently develop a Toolbox containing best practices for the application of the Broadband Cost Reduction Directive and building up on its minimum requirements, making improvements in the following areas: (i) streamlining permit granting procedures, in the context of wider efforts for the improvement of the efficiency and transparency of public administrations and to contribute to easing business activities; (ii) increasing transparency and reinforcing the single information point; (iii) expanding the right to access existing physical infrastructure controlled by public sector bodies; and (iv) improving the dispute resolution mechanism. In addition, Member States should identify measures that would help reduce the environmental impact of electronic communications networks and ensure their sustainability.

(10)

Pursuant to Article 7 of the Broadband Cost Reduction Directive, Member States need to ensure that competent authorities take decisions relating to all permits for necessary civil works, with a view to deploying elements of high-speed electronic communications networks within 4 months, extended exceptionally, in duly justified cases or to comply with other deadlines or obligations laid down in national law for the proper conduct of the procedure. To avoid inconsistent practices across the Union, Member States should therefore seek to facilitate compliance with the 4 months deadline for granting or refusing all necessary permits and should also identify together best practices that further streamline permit granting procedures, such as tacit approval and simplified permit procedures.

(11)

For certain types of network deployments, some Member States have set up simplified permit procedures as a way of significantly reducing the administrative burden on both operators and national administrations. Member States should consider the use of simplified permit granting procedures or permit exemptions beyond Article 57 of the European Electronic Communication Code, as well as defining the network deployment scenarios that would benefit from these (e.g. for provisional deployments necessary to ensure the continuity of electronic communication services or for simple upgrades of existing networks, including the upgrade to 5G of existing mobile base stations).

(12)

To reduce administrative burden and streamline permit granting procedures, the use of electronic procedures should be facilitated and the role of the single information point should be enhanced. To this end, Member States should reflect on how the single information point could become an effective single entry point to submit electronic applications for permits at all administrative levels.

(13)

As a further step, an integrated approach to issuing permits under the responsibility of the single information point would bring significant added value. This could operate by way of a fully coordinated procedure in cases where more than one competent authority is involved. Member States should therefore consider giving the single information point an active role in coordinating and monitoring the permit granting procedures by different competent authorities and ensuring the proper exchange of relevant information.

(14)

To avoid undesirable delays, procedures for permits and rights of way, including along communication routes (e.g. roads, railways), pursuant to Article 43 of the European Electronic Communications Code, should be carried out in parallel. Member States should explore the possibility of granting rights of way as quickly as possible and, in any case, within the maximum deadline for permits of 4 months, thereby aligning this procedure with the provisions of Article 7(3) of the Broadband Cost Reduction Directive.

(15)

Given the increasing number of permits for deploying electronic communications networks, and their predominantly local character, fees for permits for civil works may differ significantly between and within Member States. They may also represent a significant part of the cost of deployment, particularly in rural and remote areas, where the cost of deployment per user is highest. It would therefore be very useful if Member States were to exchange and agree on ways to keep the cost of granting permits at a level which would not be a disincentive for investment, taking into account the multiplicity of permits often required.

(16)

Access to comprehensive, accurate and updated information is a prerequisite for ensuring efficient use of existing physical infrastructure and appropriate coordination of civil works. The role of the single information point is crucial in this respect. Improving the transparency of existing infrastructure and planned civil works is a key preliminary step for enabling access to existing infrastructure and enhancing coordination of civil works, which in turn generate additional benefits for the environment and individuals. Member States should therefore be encouraged to consider feeding the single information point with all the physical infrastructure information available in a given area, from different sources, and to assist in providing georeferenced information.

(17)

Member States should be encouraged to explore means to improve transparency concerning existing physical infrastructure by increasing the quantity and quality of information available via the single information point. This includes information that is provided bilaterally between operators, pursuant to Articles 4(2) and 4(4) of the Broadband Cost Reduction Directive, upon request, or that concerns physical infrastructure controlled by public sector bodies.

(18)

In addition to the requirements of the Broadband Cost Reduction Directive on access to existing physical infrastructure, the deployment of very high capacity networks can be further facilitated by enabling operators to obtain access to relevant physical infrastructure controlled by public sector bodies, on similar conditions as those set in Article 3 of that Directive. Such physical infrastructure would include buildings, particularly rooftops, and street furniture, such as poles for streetlights, street signs, traffic lights, billboards, bus and tramway stops and metro stations.

(19)

The Broadband Cost Reduction Directive provides for recourse to dispute resolution procedures in case negotiations related to access to infrastructures fail. Member States should step up their efforts to identify together best practices for effective and efficient dispute resolution mechanisms and the good functioning of dispute resolution bodies across the Union. In the interest of transparency, these practices should include the timely publication of dispute resolution bodies’ decisions.

(20)

The environmental footprint of the electronic communications sector is increasing, and it is essential to consider all possible means of counteracting this trend. Incentives to deploy networks with, for example, a reduced carbon footprint can contribute to the sustainability of the sector and to climate change mitigation and adaptation. Member States are called upon, in close cooperation with the Commission, to identify and promote such incentives, which might include fast-track permit granting procedures or reduced permit and access fees for networks which meet certain environmental criteria.

(21)

In order to avoid unduly delaying the processes for authorising spectrum use and the installation of wireless communications networks, Member States should exchange best practices on how to take account of the results of the environmental assessment, when this is required, and in particular when authorities prepare the framework for future development consent of projects, while fully respecting Union legislation, in particular Directive 2001/42/EC of the European Parliament and of the Council (6) (‘Strategic Environmental Assessment Directive’), Directive 2011/92/EU of the European Parliament and of the Council (7) (‘Environmental Impact Assessment Directive’) and Council Directive 92/43/EEC (8) (‘Habitats Directive’). The environmental assessment should take place at the stage when environmental effects can be identified and assessed.

(22)

The European Electronic Communications Code sets a common deadline of the end of 2020 for the Member States to allow use of the 3,4-3,8 GHz band and at least 1 GHz of the 24,25-27,5 GHz pioneer frequency band for 5G. In addition, Decision (EU) 2017/899 of the European Parliament and of the Council (9) sets a common deadline of 30 June 2020 for the Member States to allow use of the 700 MHz pioneer frequency band for 5G. Member States should ensure that the management of spectrum promotes high-quality connectivity for businesses and society with a cross-border dimension, as well as the digitisation of industry, thereby generating benefits for the economy and for society as a whole, including in terms of accessibility, equal opportunity and inclusivity. The attainment of that objective could be facilitated by the timely exchange of views and best practices ahead of and within the peer review process established by the European Electronic Communications Code.

(23)

In order to ensure the fast and secure deployment of 5G networks and the uptake of innovative services from 2020, in accordance with the 5G action plan (10), and taking into account the toolbox pursuant to the Commission Recommendation on cybersecurity of 5G networks (11), Member States should avoid or minimise any delays in allowing use of 5G pioneer frequency bands due to the COVID-19 crisis.

(24)

Noting the importance of secure and resilient 5G infrastructure for recovery and economic growth, spectrum authorisation procedures should support, where appropriate, infrastructure investment by alleviating the financial burden on radio spectrum users, particularly on operators, in line with State aid rules. This is even more crucial under the circumstances of the COVID-19 crisis. To this end, Member States should be encouraged to identify spectrum authorisation rules that aim to apply a pro-investment spectrum pricing methodology. Such practices may cover incentives where appropriate to provide high-quality wireless coverage to ensure widely available services, including across borders.

(25)

To avoid spectrum scarcity that leads to higher bids in spectrum auctions, best practices may cover measures not to reserve spectrum in 5G pioneer frequency bands for the purposes of public security and defence, as far as possible or measures to reserve EU-harmonised radio spectrum for electronic communications services for private radio spectrum users, as regards both the amount of spectrum and the choice of a specific frequency band, only when duly justified.

(26)

5G networks require a considerably denser cell deployment in higher frequency bands compared to previous technology generations. Passive and active infrastructure sharing and joint roll-out of wireless infrastructure can reduce the cost of such deployment (including incremental costs), particularly when using the 3,4-3,8 GHz and 24,25-27,5 GHz frequency bands, and thereby accelerate its pace, support increased network coverage and allow for more effective and efficient use of radio spectrum to the benefit of consumers. It should therefore be considered positively by competent authorities, in particular in areas of limited economic return.

(27)

The deployment of dense 5G wireless networks would also benefit from flexible authorisation regimes, which stimulate investment in wireless networks and ensure efficient spectrum use. High frequency bands above 24 GHz (‘mm-wave frequency bands’), such as the 24,25-27,5 GHz frequency band, offer a high amount of radio spectrum with geographically limited propagation characteristics. While Member States should generally use competitive selection procedures such as auctions to grant rights of use in frequency bands affected by scarcity, such procedures may constrain in certain cases the potential for investment in dense 5G wireless networks as well as flexibility and the resulting efficiency of spectrum use. Individual authorisation of harmonised mm-wave frequency bands that uses a fast-track administrative procedure which is open, objective, proportionate, non-discriminatory and follows transparent criteria and procedures, could be considered as a best practice.

(28)

In order to avoid divergent solutions when granting rights to use radio spectrum to provide cross-border wireless services, Member States should coordinate better when assigning radio spectrum so as to foster wireless connectivity that will support the Union’s industrial transformation and digital sovereignty based on the flexible, multi-service capabilities of 5G infrastructure. Coordinated spectrum assignment is particularly important to meet the connectivity requirements of new use cases that contribute to the digitalisation of operations in road and rail mobility and transport and industrial manufacturing. These conditions relate particularly to quality of service, expressed in terms of capacity, throughput, latency, reliability and network security and resilience.

(29)

To this end, the Member States should contribute to a set of best practices and agree thereupon, in close cooperation with Commission and with the support of the Radio Spectrum Policy Group, for major innovative examples in industry sectors with a cross-border dimension, such as road or rail transport (including cross-border corridors for cooperative, connected and automated mobility) and smart factories. Such practices could take advantage of the results from EU-funded pilots and trials in vertical sectors including 5G cross-border corridors. Such practices should identify relevant common frequency ranges, authorisation regimes and conditions for operators for the provision of dedicated (sectoral) wireless services. Common authorisation regimes could address individual authorisation of operators and industrial stakeholders, including shared spectrum use. Common authorisation conditions could address roll-out, quality of service, shared spectrum use, coexistence between wireless systems, spectrum hoarding, cybersecurity, and negotiated agreements between mobile operators and industrial stakeholders as well as measures to protect essential communications for air transport. In this regard, the Radio Spectrum Policy Group should assist the Commission to determine if there is a need to issue a mandate to the European Conference of Postal and Telecommunications Administrations for developing harmonised technical conditions for spectrum use.

(30)

Member States should coordinate the spectrum authorisation process and, in particular, make use of a joint authorisation process in accordance with Article 37 of the European Electronic Communication Code when implementing the set of best practices developed by the Member States in cooperation with the Commission. Such a process may include the assignment of a common dedicated frequency range under common authorisation conditions.

(31)

The implementation of the Toolbox would benefit from a clear process, adequate monitoring, increased transparency and dialogue at national and Union level.

(32)

Member States should work together, and in close cooperation with the Commission, to develop the Toolbox. Where appropriate, the Radio Spectrum Policy Group, the Body of European Regulators for Electronic Communications and national regulatory authorities, the Broadband Competence Offices network, dispute settlement bodies and the competent authorities in charge of the functions of the single information point should be closely involved.

(33)

This Recommendation is without prejudice to the application of competition law and State aid rules,

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In particular, Member States should report on any relevant measures which have as their objectives:

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