ESMA Publishes Consultation Papers on CCP Recovery Regime

The European Securities and Markets Authority (ESMA), an independent EU authority established in 2011, announced that it has published seven consultation papers to seek stakeholder feedback on how to implement its central counterparty (CCP) recovery mandates.

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CCPs are a market infrastructure, which reduces systemic risk and enhances financial stability by standing between the two counterparties to a derivatives contract and thereby reducing the risk for both. Thus, their services are crucial in the financial market.

The seven consultation papers include proposals for Draft Regulatory Technical Standards (RTS) on the methodology for calculation and maintenance of the additional amount of pre-funded dedicated own resources, Guidelines on the consistent application of the triggers for the use of Early Intervention Measures as well as Guidelines on CCP recovery plan indicators and scenarios.

“The launch of ESMA’s public consultations, on the implementation of the CCP recovery mandates, is the first step to ensuring consistency of EU central counterparties recovery regimes at EU level in line with the highest international standards,” Klaus Löber, Chair of the CCP Supervisory Committee said.

According to ESMA, the recommendations would support the development of CCP recovery plans. The closing date for responses is 20 September 2021. ESMA will organise an open hearing on the consultation papers on 14 September 2021.

Last year, the agency allowed three CCPs established in the United Kingdom as third-country CCPs​ to temporarily provide services in the twenty-eight nation bloc after the deadline of the Brexit transaction.