COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT pursuant to Article 294(6) of the Treaty on the Functioning of the European Union concerning the position of the Council on the adoption of a Regulation of the European Parliament and of the Council on a framework for the recovery and resolution of central counterparties and amending Regulations (EU) No 1095/2010, (EU) No 648/2012, and (EU) 2015/2365
Date: 2020-11-18
Institutions: Directorate-General for Financial Stability, Financial Services and Capital Markets Union, European Commission
Subjects: company in difficulties, financial institution, financial instrument, financial intervention, financial legislation, financial services, financial solvency, financial transaction

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   EUROPEAN COMMISSION  Brussels, 18.11.2020  COM(2020) 694 final 2016/0365 (COD)  COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT  pursuant to Article 294(6) of the Treaty on the Functioning of the European Union  concerning the position of the Council on the adoption of a Regulation of the European Parliament and of the Council on a framework for the recovery and resolution of central counterparties and amending Regulations (EU) No 1095/2010, (EU) No 648/2012, and (EU) 2015/2365  
 
2016/0365 (COD) 

COMMUNICATION FROM THE COMMISSION 
TO THE EUROPEAN PARLIAMENT 

pursuant to Article 294(6) of the Treaty on the Functioning of the European Union 

concerning the 

position of the Council on the adoption of a Regulation of the European Parliament and 
of the Council on a framework for the recovery and resolution of central counterparties 
and amending Regulations (EU) No 1095/2010, (EU) No 648/2012, and (EU) 2015/2365 

1. 

BACKGROUND 

Date of transmission of the proposal to the European Parliament and to 
the Council (document COM/2016/0856 final – 2016/0365 COD): 

28 November 2016 

Date of the opinion of the European Economic and Social Committee: 

29 March 2017 

Date of the opinion of the European Central Bank: 

20 September 2017 

Date of the position of the European Parliament, first reading: 

27 March 2019 

Date of transmission of the amended proposal: 

N/A  

Date of adoption of the position of the Council: 

17 November 2020 

2. 

OBJECTIVE OF THE PROPOSAL FROM THE COMMISSION 

A  central  clearing  counterparty  (CCP)  is  a  financial  markets  infrastructure  that  acts  as  the 
counterparty  to  both  sides  of  a  transaction  in  a  financial  instrument.  CCPs  clear  a  range  of 
financial  instruments.  They  are  essential  to  the  financial  system  because  they  manage 
significant  amounts  of  counterparty  risk.  In  doing  that,  they  create  links  between  multiple 
banks, other financial counterparties and corporates (the clearing participants1). 

The  number  of  transactions  processed  by  CCPs  has  increased  since  the  2009  G20 
commitment to have standardised over-the-counter (OTC) derivatives cleared through CCPs. 

The  failure  of  a  CCP  is  very  unlikely  but  would  have  a  considerable  impact  on  financial 
stability.  To  address  the  potential  risks  if  a  CCP  were  to  fail,  the  Commission  adopted  a 
legislative proposal on CCP recovery and resolution on 28 November 20162. It builds on the 

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The term “clearing participants” means “clearing members” and “clients”. In EMIR, “clearing member” 
means  an  undertaking  which  participates  in  a  CCP  and  which  is  responsible  for  discharging  the 
financial obligations arising from that participation and ‘client’ means an undertaking with a contractual 
relationship with a clearing member of a CCP which enables that undertaking to clear its transactions 
with that CCP. 
Proposal  for  a  Regulation  of  the  European  parliament  and  of  the  Council  on  a  framework  for  the 
recovery and resolution of central counterparties and amending Regulations (EU) No 1095/2010, (EU) 
No 648/2012, and (EU) 2015/2365. 

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European  Market  Infrastructure  Regulation3  (EMIR)  and  is  based  on  the  conceptual 
framework  of  the  BRRD4  (Bank  Recovery  and  Resolution  Directive).  It  will  transpose  into 
EU law the international standards set by the Financial Stability Board’s Key Attributes5 and 
Guidance6 that the EU committed to in the G20 framework. 

The  aim  of  the  proposal  is  to  ensure  that  both  CCPs  and  national  authorities  in  the  EU  are 
prepared and have the tools to act decisively in a crisis scenario. The proposed Regulation is 
built  on  three  pillars:  preparedness  (recovery  and  resolution  plans,  powers  to  improve 
resolvability),  early  intervention  powers,  and  a  harmonised  resolution  toolkit  for  national 
resolution  authorities.  The  new  rules  will  ensure  that  CCPs'  critical  functions  are  preserved 
while  maintaining  financial  stability  and  helping  to  avoid  that  the  costs  of  resolving  failing 
CCPs fall on taxpayers. 

3. 

COMMENTS ON THE POSITION OF THE COUNCIL 

The  position  of  the  Council  reflects  the  political  agreement  reached  between  the  European 
Parliament and the Council on 23 June 2020. The Commission supports this agreement. 

The political agreement introduced several changes that deviate from the initial Commission 
proposal, including on the following points: 

A. 

Governance 

i. 

Resolution college membership 

The  political  agreement  confirms  the  composition  of  the  resolution  college  based  on  an 
extension  of  the  composition  of  the  existing  supervisory  college,  but  takes  into  account  the 
modifications incorporated through the review of EMIR in October 20197. 

The  resolution  college  therefore  includes,  as  voting  members,  not  only  the  members  of  the 
revised  EMIR  supervisory  college,  the  resolution  authorities  of  the  CCP  and  of  any 
interoperable  CCPs  and  the  resolution  authorities  of  the  CCP’s  clearing  members  from  the 
three  Member  States  that  have  the  largest  contributions  to  its  default  fund  but  also,  as 
observers: 

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the competent and resolution authorities of other clearing members; 

the competent or resolution authorities of clients from any Member State that is not 
already represented by a college member; 

Regulation (EU) No 648/2012 of the European Parliament and of the Council of 4 July 2012 on OTC 
derivatives, central counterparties and trade repositories. 
Directive  2014/59/EU  of  the  European  Parliament  and  of  the  Council  of  15  May  2014 establishing  a 
framework  for  the  recovery  and  resolution  of  credit  institutions  and  investment  firms  and  amending 
Council  Directive  82/891/EEC,  and  Directives  2001/24/EC,  2002/47/EC,  2004/25/EC,  2005/56/EC, 
2007/36/EC, 2011/35/EU, 2012/30/EU and 2013/36/EU, and Regulations (EU) No 1093/2010 and (EU) 
No 648/2012, of the European Parliament and of the Council. 
Key Attributes of Effective Resolution Regimes for Financial Institutions, 15 October 2014. 
https://www.fsb.org/wp-content/uploads/r_141015.pdf  
Guidance on Central Counterparty Resolution and Resolution Planning, 5 July 2017. 
https://www.fsb.org/wp-content/uploads/P050717-1.pdf  
Regulation  (EU)  2019/2099  of  the  European  Parliament  and  of  the  Council  of  23  October  2019 
amending  Regulation  (EU)  No  648/2012  as  regards  the  procedures  and  authorities  involved  for  the 
authorisation of CCPs and requirements for the recognition of third-country CCPs. 

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other central banks of issue; and, 

the competent authority of the parent undertaking, where applicable. 

In the three first cases, the request to participate in the resolution college should be justified 
by  the  systemic  effects  of  the  CCP’s  failure  in  their  respective  Member  States  and  on  their 
currencies of issue. 

This  extended  composition  aims  at  fostering  cooperation  and  information  sharing  among 
authorities  and  at  ensuring  that  the  interests  of  a  larger  number  of  potentially  affected 
stakeholders are taken into account in the resolution planning. 

ii. 

Ex-ante information 

The  political  agreement  envisages  that  resolution  authorities  notify  ex  ante  the  resolution 
college of the resolution actions they intend to take and whether the resolution action deviates 
from  the  resolution  plan.  An  ex  post  notification  completes  the  framework  to  provide  the 
reasons  for  any  deviation  to  the  resolution  college  as  soon  as  practicable  after  taking  the 
resolution action. 

This notification process aims to be a pivotal element of transparency for the decision-making 
framework, enabling the authorities of the concerned Member States to assess and anticipate 
the effects of a CCP’s resolution. 

ESMA  binding  mediation  on  recovery  plans,  resolution  plans,  and  resolvability 

iii. 
measures 

As proposed, most decisions of the national competent and resolution authorities in relation to 
the  preparatory  phases  are  subject  to  a  joint  decision  by  the  voting  members  of  the 
supervisory  and  resolution  colleges.  Such  joint  decision  should  be  reached  within  a  four-
month  period.  Absent  such  common  decision,  the  respective  home  authorities  of  the  CCP 
could decide on their own, unless ESMA binding mediation is called upon. 

The  political  agreement  sets  the  threshold  for  calling  upon  ESMA  binding  mediation  for 
issues related to recovery and resolution planning to a simple majority of the supervisory or 
resolution college. 

This is found to be a balance between allowing any college member to submit such request to 
ESMA,  following  for  instance  the  mechanism  of  the  BRRD,  and  requiring  a  two-third 
majority of the voting college members, as is the case in EMIR. It should allow the respective 
colleges  to  work  effectively,  aiming  at  taking decisions in  the preparation phase that reflect 
the  interest  of  their  members,  while  benefitting  from  the  mediation  mechanism  in  the  most 
difficult cases. 

iv. 

ESMA mandates 

The  political  agreement  requires  ESMA  to  develop  Regulatory  Technical  Standards  to 
specify: 

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the  content  of  the  written  arrangements  and  procedures  for  the  functioning  of  the 
resolution colleges; 

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the  methodology  for  calculation  and  maintenance  of  the  amount  of  the  additional 
prefunded dedicated own resources to be used by the CCP in recovery as well as the 
procedures,  in  case  such  own  resources  are  not  available,  for  the  CCP  to  require 
contributions  of  non-defaulting  clearing  members  and  to  subsequently  reimburse 
such clearing members; 

the assessment methodology for recovery plans; 

the contents of resolution plans; 

the  order  of  allocation,  maximum  period  and  maximum  share  of  the  CCP’s  annual 
profits under the recompense mechanism in recovery; 

the elements relevant to the conduct of valuations; 

the  methodology  for  calculating  the  buffer  for  additional  losses  to  be  included  in 
provisional valuations; 

the minimum elements that should be included in a business reorganisation; criteria 
that a business reorganisation plan is to fulfil; 

the methodology for final valuation under the no-credit-worse-off principle; 

the conditions for clearing members to pass on compensation to their clients in line 
with the contractual symmetry principle. 

It also requires ESMA to develop guidelines setting out or promoting: 

the  minimum  list  of  qualitative  and  quantitative  indicators  for  triggering  recovery 
measures; 

the range of scenarios to be considered for the recovery plan; 

the convergence of resolution practices regarding the resolvability assessment; 

the  consistent  application  of  the  triggers  for  the  use  of  the  early  intervention 
measures; 

the convergence of supervisory and resolution practices regarding the application of 
the circumstances under which a CCP is deemed to be failing or likely to fail; 

the methodology to be used by the resolution authority for determining the valuation 
of contracts to be terminated; 

the types and content of the provisions contained in cooperation arrangements with 
third countries; 

the circumstances in which the competent authority may request the CCP to refrain 
from certain payout operations following a non-default event. 

B. 

Early intervention, recovery plans and tools 

i. 

Additional skin-in-the-game (SITG) 

EMIR introduced a layer of CCP’s own resources in the loss allocation mechanisms of CCPs, 
that is to be used just before the non-defaulting clearing members’ contributions to the default 
fund. This first SITG is set at 25% of a CCP’s capital requirements and aims at ensuring that 
the owners and shareholders of a CCP exercise an appropriate oversight on its activities and 
risk management practices. 

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The political agreement introduces an additional layer of CCP’s own resources, i.e. a second 
SITG,  prior  to  the  application  by  the  CCP  of  any  cash  call  or  variation  margins  gains 
haircutting (VMGH) in recovery. This second SITG is set between 10%8 and 25% of a CCP’s 
risk-based  capital  requirements  as  mandated  under  EMIR.  The  methodology  for  calculating 
the  second  SITG  as  well  as  the  conditions  for  maintaining  it  will  be  specified  in  a 
Commission  delegated  act  based  on  a  Regulatory  Technical  Standard  developed  by  ESMA, 
taking into account: 

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the  structure  and  internal  organisation  of  CCPs  and  the  nature/scope/complexity  of 
their activities; 

the  structure  of  incentives  of  CCP’s  shareholders,  management,  clearing  members 
and clients; 

the  appropriateness  for  CCPs,  depending  on  the  currencies  in  which  the  financial 
instruments they clear are denominated, the currencies accepted as collateral and the 
risk stemming from their activities, to benefit from a broader investment policy; 

the international context and the practices in other jurisdicitions. 

A broader investment policy, granted in accordance with the conditions that will be developed 
by ESMA in the regulatory technical standard, may entail additional liquidity risks. Therefore, 
in the event that the assets in which the second SITG has been invested are not immediately 
available  to  absorb  losses,  the  political  agreement  allows  CCPs  to  proceed  with  their 
allocation  to  clearing  members  as  set  out  in  their  recovery  plans  in  order  to  guarantee  the 
continuity  of  the  critical  clearing  services.  CCPs  will  have  to  subsequently  reimburse  the 
clearing members up to the amount of the second SITG. 

ii. 

Variation Margins Gains Haircutting (VMGH) and cash calls in recovery 

The political agreement foresees the use of VMGH, where relevant depending on the CCP’s 
activities, and cash calls in recovery. This reflects the current practice of most CCPs and aims 
at improving the protection of taxpayers. In parallel, the political agreement is reinforcing the 
transparency  of  the  recovery  measures  for  stakeholders  as  well  as  their  involvement  in  the 
development of the recovery plans. It is also further framing the use of recovery measures by 
introducing several elements of monitoring and control by the competent authorities. 

iii.   Other: Participation of clients in auctions; restriction of remunerations  

The  political  agreement  includes  an  early  intervention  power  that  allows  the  competent 
authority  to  broaden  the  scope  of  auctions  to  clients  and  enable  them  to  make  bids  for  the 
defaulting  clearing  member’s  positions.  The  competent  authority  would  require  the  CCP  to 
instruct clearing members to invite their clients to participate directly in auctions organised by 
the CCP. This possibility is subject to the conditions that the nature of the auction justifies this 
exceptional participation and that the client is able to demonstrate to the CCP that it has set up 
the  appropriate  contractual  relationship  with  a  clearing  member  to  execute  and  clear  the 
transactions that may result from the auction. 

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The notification threshold, as set out in Article 1(3) of the Commission Delegated Regulation (EU) No 
152/2013  of  19  December  2012  supplementing  Regulation  (EU)  No  648/2012  of  the  European 
Parliament and of the Council with regard to regulatory technical standards on capital requirements for 
central counterparties, can be used to meet all or part of the second SITG requirement. 

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Competent authorities are also empowered to restrict or prohibit any remuneration of equity, 
including dividend payments and buybacks by the CCP, and to restrict, prohibit or freeze any 
payments of variable remuneration to senior management. 

C. 

Resolution tools 

i. 

Resolution cash calls 

The political agreement confirms a resolution cash call reserved for the resolution authorities 
in  addition  to  the  cash  calls  foreseen  in  the  CCP’s  recovery  measures.  The  maximum 
exposure  of  clearing  members  due  to  their  additional  financial  commitment  is  increased  to 
two  times  their  contributions  to  the  CCP’s  default  fund.  This  approach  remains  consistent 
with  EMIR  (Article  43(3))  that  requires  that  clearing  members  of  a  CCP  have  limited 
exposures  towards  the  CCP.  The  political  agreement  also  clarifies  the  use  of  the  resolution 
cash  call  in  case  of  non-default  events  as  well  as  the  determination  of  the  cap  when  CCPs 
have multiple default funds. 

ii. 

Initial Margin Haircutting (IMH) 

The  political  agreement  opts  for  a  closed  list  of  resolution  tools  and  explicitly  excludes  the 
use of IMH. This approach is found consistent with EMIR (Article 45 (4)) that specifies that a 
CCP shall not use the margins posted by non-defaulting clearing members to cover the losses 
resulting  from  the  default  of  another  clearing  member.  It  also  facilitates  the  enforcement  of 
resolution  actions  in  major  third-country  jurisdictions  where  initial  margins  are  explicitly 
excluded from the insolvency procedure in application of the local rules and regulations. 

D. 

No Creditor Worse Off than in liquidation (NCWO) safeguard 

The NCWO safeguard is aimed at  protecting the  fundamental  rights  of CCPs’ shareholders, 
clearing members and other creditors in resolution. 

In  line  with  international  guidance  set  out  by  the  Financial  Stability  Board,  the  political 
agreement compares the losses incurred by CCP’s shareholders, clearing members and other 
creditors in  resolution  with  the losses they would have realistically incurred if the CCP had 
been  wound  up  under  normal  insolvency  proceedings,  following  the  full  application  of  the 
applicable contractual obligations and other arrangements in its operating rules. 

In  terms  of  valuation,  the  political  agreement  requires  that  the  NCWO  counterfactual  takes 
into account a commercially reasonable estimate of the direct replacement costs incurred by 
clearing members to reopen comparable net positions in the market. It also requires the use of 
the  CCP's  own  pricing  methodology  to  estimate  such  losses  unless  such  methodology  for 
price determination does not reflect the effective market conditions. 

The political agreement also introduces a notion of “contractual symmetry” that extends the 
protection  of  the  NCWO  safeguard  to  clients.  It  stipulates  that  if  contractual  arrangements 
allow clearing members to pass on the negative consequences of the resolution tools to their 
clients,  then  contractual  arrangements  shall  also  have  to  include,  on  an  equivalent  and 
proportionate basis, the right of clients to any compensation clearing members receive to the 
extent  that  these  refer  to  client  positions.  This  provision  also  applies  to  indirect  clearing 
services. 

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E. 

Compensation of non-defaulting clearing members 

The political agreement confirms the possibility for a resolution authority to require the CCP 
to  compensate  non-defaulting  clearing  members  for  their  losses  stemming  from  the 
application  of  loss  allocation  tools,  where  the  losses  are  in  excess  of  those  that  the  non-
defaulting clearing members would have borne in accordance with the CCP's operating rules. 

This  compensation  would  be  limited  to  cases  where  the  non-defaulting  clearing  member 
would have been entitled to a no creditor worse off (NCWO) claim. 

It can take the form of instruments of ownership, debt instruments or instruments recognising 
a claim on the CCP’s future profits. 

In  order  to  incentivise  clearing  members  to  support  the  recovery  process,  the  compensation 
mechanism takes account of any outstanding contractual obligations of the clearing members 
toward the CCP. 

The compensation will be deducted from any NCWO claim due to clearing members, thereby 
reducing considerations Member States would have to pay to clearing members should those 
have contributed more to resolution than they would have lost in insolvency. 

F. 

Recoupment of public funds 

Several  conditions  are  added  by  the  political  agreement  for  the  use  of  the  government 
stabilisation  tools  in  the  form  of  equity  support  and  temporary  public  ownership.  One 
important  condition  relates  to  the  write  down  and  conversion  by  the  resolution  authority  of 
any remaining instruments of ownership, debt instruments or other unsecured liabilities before 
or together with the use of the government stabilisation tools. Member States should also have 
defined,  in  advance  of  the  use  of  the  governement  stabilisation  tools,  comprehensive  and 
credible arrangements for the recoupment of public funds over a suitable period of time. 

The  political  agreement  mandates  the  recoupment  of  any  public  funds  used  as  government 
stabilisation tools as well as any reasonable expenses incurred by the resolution authority in 
connection with  the use  of resolution  tools or powers. This  includes the  expenses related to 
possible NCWO claims. 

The political agreement also enumerates the main sources of recoupment. 

Finally,  to  complement  these  sources,  the  political  agreement  introduces  a  mechanism  of 
“delayed  enforcement”  of  any  remaining  contractual  obligations  from  stakeholders  vis-à-vis 
the  CCP,  in  particular  clearing  members  or  parent  undertakings,  that  would  not  have  been 
enforced  during  a  resolution  process  that  involved  the  use  of  public  funds.  Such  partial 
enforcement is allowed by the political agreement in situations where: 

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the full application of the outstanding contractual obligations is not possible within a 
reasonable timeframe; 

the  full  application  of  the  outstanding  contractual  obligations  would  create 
significant adverse effects on the finacial system or foster contagion; or, 

the  application  of  the  resolution  tools  would  be  more  apporpriate  to  achieve  the 
resolution objectives in a timely manner. 

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The  resolution  authority  would  have  the  possibility  to  still  enforce  those  remaining 
contractual  obligations  to  recover  the  use  of  public  funds  up  to  18  months  after  the  CCP is 
considered  to  be  failing  or  likely  to  fail  if  the  reasons  for  refraining  from  enforcing  these 
obligations no longer exist. 

G. 

Treatment of CCPs as part of groups 

The political  agreement  removes the possibility  of group recovery plans  but  strengthens the 
requirement for authorities to consider group interdependencies in the context of assessing or 
designing recovery and resolution plans. In particular, the political agreement requires CCPs 
to  develop  recovery  scenarios  in  which  the  financial  support  eventually  agreed  with  their 
groups or parent undertakings would not be available. 

H. 

Amendments of EMIR and other acts 

The political agreement introduces several amendments to existing legislative acts. The most 
significant ones are the following. 

i. 

Suspension of the clearing obligation 

Consistent  with  EMIR  Refit9,  the  political  agreement  modifies  EMIR  to  allow  not  only  the 
suspension of the clearing but also of the trading obligations in cases of resolution. 

ii. 

Interest rates benchmarks 

The political agreement introduces an amendment to EMIR to provide an exemption from the 
clearing  obligation  or  the  margin  requirements  to  legacy  trades  if  these  trades  were  to  be 
novated  for  the  sole  purpose  of  implementing  or  preparing  for  the  implementation  of  the 
Financial Stability Board’s interest rate benchmark reform10. 

This  amendment  implements  an  international  agreement  reached  by  the  Financial  Stability 
Board,  the  Basel  Committee  on  Banking  Supervision  and  the  International  Organisation  of 
Securities Commissions recommending to provide such a relief. 

iii. 

Open access 

The political agreement retroactively postpones by one year the open access provisions of the 
Markets in Financial Instruments Regulation (MiFIR)11. 

MiFIR introduces a non-discriminatory  open access  regime to  trading  venues and CCPs for 
exchange-traded  derivatives  (ETDs).  The  key  purpose  of  the  open  access  requirement  is  to 
break  “the  vertical  silo”  between  trading  and  clearing  infrastructures  and  facilitate 
competition.  Very  importantly,  MiFIR  open  access  rules  also  added  multiple  temporary 

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Regulation (EU) 2019/834 of the European Parliament and of the Council of 20 May 2019 amending 
Regulation  (EU)  No  648/2012  as  regards  the  clearing  obligation,  the  suspension  of  the  clearing 
obligation, the reporting requirements, the risk-mitigation techniques for OTC derivative contracts not 
cleared  by  a  central  counterparty,  the  registration  and  supervision  of  trade  repositories  and  the 
requirements for trade repositories. 
https://www.fsb.org/work-of-the-fsb/policy-development/additional-policy-areas/financial-benchmarks/  
Regulation  (EU)  No  600/2014  of  the  European  Parliament  and  of  the  Council  of  15  May  2014  on 
markets in financial instruments and amending Regulation (EU) No 648/2012. 

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transition  periods  and  opt-outs  amounting  to  an  exemption  from  the  application  of  access 
rights. All in all, Article 54(2) of MiFIR provides national competent authorities (NCAs) with 
the  possibility  to  temporarily  exempt  trading  venues  and  CCPs  from  the  MiFIR  access 
provisions for ETDs. The 30-month transition period in that article has been used and would 
have ended on 3 July 2020. 

Such  postponement  should  be  considered  in  the  perspective  of  the  effects  for  financial 
markets of the current pandemic crisis. On 11 June, ESMA issued a public statement to clarify 
the  application  of  the  MiFIR  open  access  provisions  in  light  of  the  recent  adverse 
developments  related  to  COVID-19.  It  also  aimed  to  coordinate  the  supervisory  actions  of 
national competent authorities by setting out the issues they should consider when assessing 
open  access  requests.  ESMA  considers  that  the  current  market  environment,  with  a  high 
degree  of  uncertainty  and  volatility  driven  by  the  COVID-19  pandemic,  may  negatively 
impact  CCPs  and  trading  venues  operations  and  increase  their  operational  risk.  These 
increased  risks,  combined  with  limited  capacity  for  assessing  access  requests  and  for 
managing the migration of transactions flows, may impact the orderly functioning of markets 
or financial stability. ESMA expects national competent authorities to take into consideration, 
to  the  extent  relevant,  the  relevant  adverse  developments  when  taking  decisions  on  open 
access  requests.  The  political  agreement  provides  a  motivation  for  the  postponement  in  the 
recitals  of  the  legislative  act,  both  regarding  the  adverse  effects  arising  from  the  COVID 
situation,  as  well  as  the  way  in  which  the  legitimate  expectation  of  market  operators  have 
been taken into account. 

In this context, the Commission takes note of the fact that the political agreement has included 
provisions  relative  to  the  open  access  requirements  under  articles  35  and  36  of  the  MiFIR. 
These  provisions  were  not  included  in  the  initial  proposal  of  the  Commission.  In  the 
Commission’s view, these provisions are not entirely in line with the EU’s institutional set-up, 
in particular the Commission’s right of initiative, and cannot constitute a precedent for future 
negotiations. 

As  the  MiFIR  changes  at  issue  do  not  entail  a  substantive  change  of  policy,  but  are  rather 
limited to a short postponement of the MiFIR access provisions, the Commission will not now 
stand  in  the  way  of  their  adoption.  This  is  without  prejudice  to  any  policy  that  the 
Commission may propose on this issue in the future. 

I. 

Final provisions, entry into application and review clause 

The political agreement introduces the following review clauses: 

– 

– 

By 31 December 2021: a review of the application of the write down and conversion 
tool in the event of resolution of CCPs in combination with other resolution tools that 
result  in  financial  losses  being  borne  by  clearing  members.  This  review  clause  is 
aimed at taking into account possible progress at the level of the Financial Stability 
Board on the treatment of CCPs’ equity in resolution. 

After 5  years:  a general  review of the legislation, in particular “the appropriateness 
and  sufficiency  of  financial  resources  available  to  the  resolution  authority  to  cover 
losses arising from a non-default event; (b) the amount of own resources of the CCP 
to  be  used  in  recovery  and  in  resolution  and  the means  for  its  use;  (c)  whether  the 
resolution tools available to the resolution authority are adequate”. 

EN 

9 

  EN 

– 

After  6,5  years:  a  review  of  the  governance  arrangements  for  the  recovery  and 
resolution of CCPs in the Union. 

Finally, the political agreement foresees a phased entry into application to take account of the 
deadlines set for ESMA to develop technical standards and guidelines, whereby: 

– 

– 

– 

Provisions  on  recovery  plans,  their  assessments  and  the  related  decision-making 
process will be applicable after 12 months; 

All provisions related to the resolution of CCPs will be applicable after 18 months; 
and, 

Provisions setting out the second SITG and a recompense mechanism for the use of 
Variation  Margin  Gains  Haircutting  for  non-default  losses  in  recovery  will  be 
applicable after 24 months. 

5. 

CONCLUSION 

The  Commission  supports  the  results  of  the  interinstitutional  negotiations  and  can  therefore 
accept the Council's position at first reading. However, it expresses its institutional concerns 
expressed in section H., point (iii). 

EN 

10 

  EN