Proposal for a REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL amending Regulation (EU) No 909/2014 as regards settlement discipline, cross-border provision of services, supervisory cooperation, provision of banking-type ancillary services and requirements for third-country central securities depositories
Date: 2022-03-16
Institutions: Directorate-General for Financial Stability, Financial Services and Capital Markets Union, European Commission
Subjects: banking, financial cooperation, financial instrument, financial legislation, financial risk, financial supervision, payment system, provision of services, securities, third country

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   EUROPEAN COMMISSION  Brussels, 16.3.2022  COM(2022) 120 final 2022/0074 (COD)  Proposal for a REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL amending Regulation (EU) No 909/2014 as regards settlement discipline, cross-border provision of services, supervisory cooperation, provision of banking-type ancillary services and requirements for third-country central securities depositories (Text with EEA relevance) {SEC(2022) 160 final} - {SWD(2022) 75 final} - {SWD(2022) 76 final}  
 
EXPLANATORY MEMORANDUM 

1. 

CONTEXT OF THE PROPOSAL 

Reasons for and objectives of the proposal 

Central  Securities  Depositories  (CSDs)  operate  the  infrastructure  that  enables  securities 
settlement,  i.e.  the  completion  of  a  securities  transaction  through  the  transfer  of  cash  or 
securities, or both1. CSDs play a crucial role in the primary market by centralising the initial 
recording of newly issued securities (“notary service”). They also maintain securities accounts 
that record the number of securities held by whom, and record each change in the holding of 
those  securities  (“central  maintenance  service”).  In  addition,  some  CSDs  provide  ancillary 
services,2 including banking services. 

CSDs play an essential role in the financing of the economy through their role in the issuance 
of  securities  and  by  allowing  securities  transactions  to  be  completed.  CSDs  also  play  an 
important  role  in  the  implementation  of  monetary  policy  by  central  banks.  For  instance, 
eligible  collateral  for  central  bank  monetary  operations,  especially  in  the  Euro  area,  flows 
through  securities  settlement  systems  operated  by  CSDs.  Today,  26  CSDs  are  authorised  in 
the  EU.  In  2019,  EU  securities  settlement  systems  handled  more  than  420 million  delivery 
instructions worth over EUR 53 trillion of securities and representing a total turnover of over 
EUR 1 120 trillion3.  

The 2014 Regulation on improving securities settlement in the European Union and on central 
securities  depositories  (CSDR)  sought  to  improve  the  safety  and  efficiency  of  settlement  as 
well  as  provide  a  set  of  common  requirements  for  CSDs  across  the  EU.  While  CSDs  were 
resilient, including in the 2008 financial crisis, and were subject to regulation under national 
law  and  international  standards,  they  were  not  regulated  consistently  across  the  European 
Union  (EU).  This  led  to  differences  in  their  safety  and  raised  level  playing  field  concerns. 
Regulating CSDs was also important to complete the regulatory framework of the trading and 
post-trading  market  infrastructures,  following  the  Market  in  Financial  Instruments  Directive 
(Directive  2004/39/EC4),  which  addressed  trading  venues,  and  the  European  Markets 
Infrastructure Regulation (Regulation (EU) No 648/20125), which addressed CCPs and trade 

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Article 2(7) of Regulation (EU) No 909/2014 of the European Parliament and of the Council of 23 July 
2014  on  improving  securities  settlement  in  the  European  Union  and  on  central  securities  depositories 
and  amending  Directives  98/26/EC  and  2014/65/EU  and  Regulation  (EU)  No  236/2012,  OJ  L  257, 
28.8.2014 (CSDR). 
These include providing cash accounts, accepting deposits  from participants to a  securities settlement 
system,  providing  cash  credit,  guarantees  of  payment  services.  Other  ancillary  services  include 
collateral management, maintenance of shareholder registers, supporting corporate actions.  
Data generated through the Securities Trading, Clearing and Settlement Statistics Database, European 
Central Bank, https://sdw.ecb.europa.eu/browse.do?node=9691131  
Directive 2004/39/EC of the European Parliament and of the Council of 21 April 2004 on  markets in 
financial  instruments  amending  Council  Directives  85/611/EEC  and  93/6/EEC  and  Directive 
2000/12/EC of the European Parliament and of the Council and repealing Council Directive 93/22/EEC, 
OJ L 145, 30.4.2004. MiFID was in force until 2 January 2018. Today, it is partly recast with MiFID2 
(Directive 2014/65/EU of the European Parliament and of the Council of 15 May 2014 on markets in 
financial  instruments  and  amending  Directive  2002/92/EC  and  Directive  2011/61/EU,  OJ  L  173, 
12.6.2014) and partly replaced with MiFIR (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, OJ L 173, 12.6.2014). 
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, OJ L 201, 27.7.2012. 

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repositories. Moreover, a consistent regulatory approach to settlement systems and settlement 
processes was important to complement and facilitate Target2-Securities (T2S)6. CSDR was 
also  the  EU’s  response  to  the  call  of  the  Financial  Stability  Board  (FSB),  on  20  October 
20107,  for  a  revision  and  enhancement  of  standards  to  ensure  more  robust  financial  market 
infrastructures.8 

CSDs  are  financial  institutions  of  systemic  importance  for  financial  markets,  hence  it  is 
essential that their framework remains fit for purpose. Regular review of CSDR is warranted 
to ensure it continues to achieve its objectives while making, where possible, the framework 
more proportionate,  and  effective.  The review  of CSDR is a key  action  in  the 2020 Capital 
Markets  Union  (CMU)  Action  Plan9  for  the  development  of  a  more  efficient  post-trading 
landscape  in  the  EU.  Resilient  and  efficient  markets  for  settlement  in  the  EU  should  better 
integrate  the  post-trading  infrastructure  landscape  and  increase  the  competitiveness  of  EU 
CSDs and EU financial markets in general. 

Article  75  of  CSDR  required  the  Commission  to  review  and  prepare  a  report  assessing  the 
implementation of the Regulation and the way forward for its review by 19 September 2019. 
The  European  Parliament,  in  its  resolution  on  further  development  of  the  Capital  Markets 
Union,10  also  invited  the  Commission  to  review  the  settlement  discipline11  regime  under 
CSDR in view of Brexit and the Covid-19 crisis. To this end, a targeted consultation12 took 
place  between  8  December  2020  and  2  February  2021.  On  1  July  2021,  the  Commission 
adopted a report.13 It concluded that in broad terms CSDR is achieving its original objectives 
to enhance the efficiency of settlement in the EU and the soundness of CSDs. For most areas, 
significant changes to CSDR were considered premature considering the recent application of 
requirements. Nevertheless, the report identified areas where further action may be necessary 
to achieve CSDR’s objectives in a more proportionate, effective and efficient manner.  

Given the need to eliminate disproportionate costs and burdens and to simplify rules without 
putting  financial  stability  at  risk,  the  CSDR  review  was  included  in  the  2021  Commission 
Regulatory Fitness and Performance programme (REFIT)14.  

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https://www.ecb.europa.eu/paym/target/t2s/html/index.en.html.  
https://www.fsb.org/wp-content/uploads/pr_101020.pdf.  
https://www.bis.org/cpmi/publ/d101.htm.  
See Communication from the Commission, A Capital Markets Union for people and businesses – New 
action plan, COM(2020) 590, Action 13. 
European  Parliament  Resolution  of  8  October  2020  on  further  development  of  the  Capital  Markets 
Union (CMU), (2020/2036, (INI)), see para. 21. 
The settlement discipline regime aims to encourage market participants to avoid settlement fails; its two 
main  elements  are  the  measures  to  prevent  settlement  fails  (Article  6  of  CSDR)  and  the  measures  to 
address  settlement  fails  (Article  7  of  CSDR).  The  latter  comprise  three  main  pillars;  reporting 
requirements, cash penalties and mandatory buy-ins. 
Commission targeted consultation on the review of regulation on improving securities settlement in the 
European  Union  and  on  central  securities  depositories,  https://ec.europa.eu/info/consultations/finance-
2020-csdr-review_en  
Report  from  the  Commission  to  the  European  Parliament  and  the  Council  under  Article  75  of 
Regulation  (EU)  No  909/2014  of  the  European  Parliament  and  of  the  Council  of  23  July  2014  on 
improving  securities  settlement  in  the  European  Union  and  on  central  securities  depositories  and 
amending  Directives  98/26/EC  and  2014/65/EU  and  Regulation  (EU)  No  236/2012,  COM(2021)  348 
final. 
Communication  from  the  Commission  to  the  European  Parliament,  the  Council,  the  European 
Economic  and  Social  Committee  and  the  Committee  of  the  Regions,  Commission  Work  Programme 
2021 ‘A Union of vitality in a world of fragility’, Annex I, COM(2020) 690 final. 

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Consistency with existing policy provisions in the policy area 

CSDR  is  related  to  several  pieces  of  EU  legislation,  including  the  Settlement  Finality 
Directive,15  MiFID  and  MiFIR  as  well  as  for  those  CSDs  that  have  been  authorised  under 
CSDR to provide banking-type ancillary services, the Capital Requirements Regulation,16 the 
Capital Requirements Directive17 and the Bank Recovery and Resolution Directive18.  

The proposals to amend CSDR are in line with the Commission’s plan for a CMU19. The aim 
of CMU is to enable capital to flow across the EU to the benefit of consumers, investors and 
companies. The Covid-19 crisis has made it more urgent to deliver on CMU as market-based 
financing is an essential component for the European economy’s return to long-term growth 
and  to  finance  the  EU’s  environmental  and  digital  transitions.  Safe  and  efficient  post-trade 
arrangements  are  an  essential  element  of  robust  capital  markets.  The  proposed  legislative 
changes would contribute to the development of a more efficient post-trading landscape in the 
EU.  

CSDR is also closely related to the Digital Finance Package20. It is particularly related to the 
proposal  for  a  Regulation  on  a  pilot  regime  for  market  infrastructures  based  on  distributed 
ledger technology21 (DLT). Under that Regulation, DLT settlement systems and DLT trading 
and settlement systems  may be exempted  from  complying  with  certain  provisions of CSDR 
subject  to  certain  conditions  with  a  view  to  stimulating  innovation  in  this  area,  while 
safeguarding  investor  protection,  market  integrity  and  financial  stability.  The  political 
agreement  on  that  proposal  also  introduced  the  possibility  to  postpone  the  CSDR  rules  on 
mandatory  buy-ins,  to  allow  more  in-depth  reflections  as  part  of  the  CSDR  review.22 
Furthermore, CSDR is related to the proposal for Regulation on digital operational resilience 
of  the  financial  sector23  that  aims  to  ensure  that  all  participants  in  the  financial  system, 
including CSDs, have the necessary safeguards in place to mitigate cyber-attacks and related 
ICT risks.  

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Directive  98/26/EC  of  the  European  Parliament  and  of  the  Council  of  19  May  1998  on  settlement 
finality in payment and securities settlement systems, OJ L 166, 11.6.1998. 
Regulation  (EU)  No  575/2013  of  the  European  Parliament  and  of  the  Council  of  26  June  2013  on 
prudential requirements for credit institutions and investment firms and amending Regulation (EU) No 
648/2012, OJ L 176, 27.6.2013.  
Directive 2013/36/EU of the European Parliament and of the Council of 26 June 2013 on access to the 
activity of credit institutions and the prudential supervision of credit institutions and investment firms, 
amending  Directive  2002/87/EC  and  repealing  Directives  2006/48/EC  and  2006/49/EC,  OJ  L  176, 
27.6.2013. 
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, OJ L 173, 12.6.2014. 
Communication  from  the  Commission,  A  Capital  Markets  Union  for  people  and  businesses  –  New 
action plan, COM(2020) 590.  
https://ec.europa.eu/info/publications/200924-digital-finance-proposals_en.  
Proposal for a Regulation of the European Parliament and of the Council on a pilot regime for market 
infrastructures based on distributed ledger technology, COM/2020/594 final.  
https://ec.europa.eu/commission/presscorner/detail/en/MEX_21_6293  
Proposal  for  a  Regulation  of  the  European  Parliament  and  of  the  Council  on  digital  operational 
resilience for the financial sector, COM/2020/595 final.  

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Market infrastructures, including CSDs, were also part of the Commission communication on 
“The European economic and financial system: fostering openness, strength and resilience”.24 
This  Communication  sets  out  how  the  EU  can  reinforce  its  open  strategic  autonomy  in  the 
macro-economic  and  financial  fields  by,  in  particular  but  not  only,  further  developing  EU 
financial market infrastructures and increasing their resilience. A strong EU settlement system 
as  regulated  by  CSDR  is  thus  an  important  element  contributing  to  EU’s  open  strategic 
autonomy in the field of financial markets infrastructure.  

Finally,  this  proposal  is  consistent  with  work  ongoing  at  the  international  level  in  the 
framework  of  the  FSB  aiming  to,  among  others,  achieve  a  consistent  application  of  the 
Principles  for  Financial  Markets  Infrastructure  (PFMIs)  developed  by  the  Committee  on 
Payments and Markets Infrastructure (CPMI) and the International Organisation of Securities 
Commissions (IOSCO). 

Consistency with other Union policies 

This  initiative  should  be  viewed  within  the  context  of  the  broader  Commission  agenda  to 
make  the  EU  markets  more  competitive  and  resilient  as  represented  by  the  CMU,  digital 
finance  and  open  strategic  autonomy  initiatives.  Safe  and  efficient  post-trade  arrangements 
are an essential element of robust capital markets. A fully functioning and integrated market 
for  capital  will  allow  the  EU’s  economy  to  grow  in  a  sustainable  way  and  be  more 
competitive, in line with the strategic priority of the Commission for an Economy that Works 
for People, focused on creating the right conditions for job creation, growth and investment.  

The initiative in question has no direct and/or identifiable impacts leading to significant harm 
or affecting the consistency with the climate-neutrality objectives and the obligations arising 
out of the European Climate Law25. 

2. 

• 

LEGAL BASIS, SUBSIDIARITY AND PROPORTIONALITY 

Legal basis 

The  legal  basis  for  this  proposal  is  Article  114  of  the  Treaty  of  the  Functioning  of  the 
European Union (TFEU), which is the legal basis for CSDR. The analysis carried out as part 
of  the  Impact  Assessment  report  identifies  that  elements  of  CSDR  need  to  be  amended  to 
eliminate disproportionate costs and compliance burdens and to simplify rules without putting 
at risk financial stability to improve the Regulation’s efficiency and facilitate the integration 
of the market for securities settlement in the European Union. 

• 

Subsidiarity (for non-exclusive competence)  

The  objectives  of  CSDR,  namely  to  lay  down  uniform  requirements  for  the  settlement  of 
financial  instruments  in  the  EU,  rules  on  the  organisation  and  conduct  of  CSDs  and  to 
promote safe, efficient and smooth settlement, cannot be sufficiently achieved by the Member 
States alone, as the co-legislators acknowledged in 2014 when adopting CSDR. 

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Commission  Communication,  ‘The  European  economic  and  financial  system:  fostering  openness, 
strength and resilience’, COM(2021) (32). 
Regulation (EU) 2021/1119 of the European Parliament and of the Council establishing the framework 
for  achieving  climate  neutrality  and  amending  Regulations  (EC)  No  401/2009  and  (EU)  2018/1999 
(‘European Climate Law’), OJ L 243, 9.7.2021. 

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Today,  Member  States  and  national  supervisors  cannot  solve  on  their  own  the  challenges 
arising  from  the  burdensome  and  unclear  CSDR  requirements  or  the  risks  resulting  from 
diverging national supervisory practices. They also cannot address on their own the risk to the 
EU  financial  stability  that  the  lack  of  information  on  the  activities  of  third-country  CSDs 
could  pose.  As  such,  the  objectives  of  this  initiative  cannot  be  sufficiently  achieved  by  the 
Member States and can therefore, by reason of the scale of actions, be better achieved at EU 
level in accordance with the principle of subsidiarity as set out in Article 5 of the Treaty on 
the European Union. 

• 

Proportionality 

The  proposal  aims  to  ensure  that  the  objectives  of  CSDR  are  met  in  a  more  proportionate, 
effective  and  efficient  manner.  This  should  translate  into  simpler  or  reduced  requirements 
aiming  to  reduce  the  administrative  burden  of  the  Regulation  on  stakeholders,  in  particular 
CSDs,  without  endangering  investor  protection,  market  integrity  and  financial  stability.  By 
reviewing the supervisory arrangements for CSDs (in particular those operating cross-border 
as  well  as  those  that  are  parts  of  groups  of  CSDs),  the  proposal  addresses  the  challenges 
observed  in  achieving  supervisory  convergence.  Furthermore,  the  recalibration  of  certain 
requirements  in  relation  to  the  passporting  process,  the  provision  of  banking-type  ancillary 
services  and  settlement  discipline,  addresses  the  concerns  raised  by  stakeholders,  including 
the European Securities and Markets Authority (ESMA), while safeguarding the objectives of 
CSDR. The proposal does not go beyond what is necessary to achieve these objectives, taking 
into account the need to monitor and to mitigate any risks the operations of CSDs, operating 
from within and outside of the EU, may raise for financial stability. The proportionality of the 
preferred  policy  options  is  further  assessed  in  Chapter  6  of  the  accompanying  Impact 
Assessment. 

• 

Choice of the instrument 

CSDR  is  a  Regulation  and  thus  it  needs  to  be  amended  by  a  legal  instrument  of  the  same 
nature. 

3. 

• 

RESULTS 
CONSULTATIONS AND IMPACT ASSESSMENTS 

EX-POST 

EVALUATIONS, 

OF 

STAKEHOLDER 

Ex-post evaluations/fitness checks of existing legislation 

An evaluation of CSDR assessed to what extent specific policy requirements in CSDR have 
met their objectives and in particular whether these requirements have done so in an efficient 
and effective way, while at the same time being coherent, relevant and providing EU added-
value. The findings of the evaluation are presented in Annex 5 of the Impact Assessment. 

Given that some of the core requirements of CSDR have only recently become applicable or 
are not applicable yet, the assessment was not a full evaluation.  

The evaluation nevertheless concluded: 

 

Effectiveness and efficiency: While the volume of settled trades increased since the 
entry into force of CSDR, cross-border transactions remained stable. In several areas, 
e.g.  passporting,  significant  barriers  exist  and  preliminary  findings  suggested  that 
actions  to  reduce  disproportionate  compliance  burden  and  to  improve  cross-border 
activity  could  be  undertaken.  Improvements  could  also  be  sought  in  the  areas  of 
banking services, as access to banking-type ancillary services is limited which in turn 

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 

 

 

inhibits  settlement  in  foreign  currencies,  and  of  supervisory  arrangements,  both 
impacting the possibilities or opportunities for CSDs to offer services cross-border. 

Relevance: The objectives of CSDR to increase the safety and efficiency of the EU 
settlement  market  and  to  ensure  a  level  playing  field  for  CSD  services  remain 
relevant. 

Coherence:  CSDR  is  aligned  with  international  efforts  to  ensure  the  stability  and 
safety  of  post-trade  infrastructures.  CSDR  is  coherent  with  other  pieces  of  EU 
legislation and policy initiatives. 

EU  added  value:  CSDR  covered  a  gap  that  existed  in  legislation  by  introducing  a 
new  framework  aiming  to  address,  in  a  uniform  process  at  EU  level,  the  lack  of  a 
harmonised  approach  towards  the  EU’s  settlement  markets  and  in  addressing  the 
related systemic risks.  

Due to the need to simplify  targeted  areas  of CSDR  and make them more  proportionate, as 
evidenced  by  the  contributions  to  the  targeted  consultation  on  CSDR  and  by  the 
Commission's review of the Regulation, the review of CSDR is a REFIT initiative. 

• 

Stakeholder consultations 

The  Commission  has  consulted  stakeholders  throughout  the  process  of  preparing  this 
proposal. In particular: 

 

 

 

a targeted consultation26 between 8 December 2020 and 2 February 2021; 

consultation on an inception impact assessment27 between 8 March 2021 and 5 April 
2021; 

two Member States’ Experts Group meetings (22 September 2020 and 15 July 2021) 
to which the European Central Bank (ECB), ESMA and the secretariat of European 
Parliament Economic and Monetary Affairs committee were also invited. 

Generally,  the  objectives  of  CSDR  to  enhance  the  efficiency  of  settlement  in  the  EU  and 
ensure  the  soundness  of  CSDs  were  supported.  Related  core  requirements  were  seen  to  be 
achieving  these  objectives,  and  delivering  on  the  EU’s  international  commitments  for 
regulatory  reform.  However,  stakeholders, 
including  Member  State  representatives, 
highlighted  a  number  of  areas  where  CSDR  requirements  could  be  adjusted  without 
compromising its overall objectives in order to: (i) simplify and increase the efficiency of the 
requirements; and (ii) reduce disproportionate costs and burdens.  

The proposal takes this stakeholder  feedback into account,  as well  as the feedback received 
through  meetings  with  a  broad  range  of  stakeholders  and  EU  authorities  and  institutions.  It 
introduces targeted amendments to CSDR aimed at:  

(a)  minimising  barriers  to  cross-border  settlement  by  simplifying  and  clarifying 
improving  cooperation  between 

burdensome  passporting 

requirements, 

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For an overview of the Commission Consultation Document, individual contributions and a Summary 
of the received input see “Targeted consultation on the review of the Regulation on improving securities 
settlement 
the  European  Union  and  on  central  securities  depositories”,  available  at: 
https://ec.europa.eu/info/consultations/finance-2020-csdr-review_en.  
For the Inception Impact Assessment and received comments see:  https://ec.europa.eu/info/law/better-
regulation/have-your-say/initiatives/12649-Central-securities-depositories-review-of-EU-rules_en.  

in 

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supervisors  and  facilitating  access  to  banking-type  ancillary  services  to 
facilitate settlement in foreign currencies;  

(b)  better  calibrating  the  application  of  some  requirements  (e.g.  on  settlement 
discipline, banking-type ancillary services) to reduce administrative burden and 
compliance costs without endangering financial stability;  

(c) 

ensuring  that  authorities  in  the  EU  have  adequate  powers  and  information  to 
monitor  risks  in  relation  to  both  EU  and  third-country  CSDs,  including  by 
enhancing their supervisory cooperation. 

• 

Collection and use of expertise 

In preparing this proposal the Commission relied on external expertise:  

– 

– 

Reports  by  ESMA:  ESMA  submitted  four  reports  in  2020  and  2021  to  the 
Commission  on  internalised  settlement,28  the  cross-border  provision  of  services  by 
CSDs  and  the  handling  of  applications  to  provide  notary  and  central  maintenance 
services cross-border,29 the provision of banking-type ancillary services30 and the use 
of  FinTech  by  CSDs.31  Such  reports  also  took  into  account  answers  to  ESMA 
surveys  from  national  authorities,  CSDs  and  participants.  The  Commission  also 
considered the bi-annual ESMA Reports on trends, risks and vulnerabilities32 in the 
financial infrastructure and services sectors; 

Targeted  input  from  the  European  System  of  Central  Banks  (ESCB)  to  the 
CSDR consultation, including an anonymised and consolidated outcome of a survey 
conducted among CSDs. 

This  input  has  been  complemented  with,  at  times  confidential,  quantitative  and  qualitative 
input from financial markets participants. 

• 

Impact assessment 

The  Commission  conducted  an  impact  assessment  of  relevant  policy  alternatives.  Policy 
options  were  identified  based  on  the  following  five  drivers:  (i)  burdensome  and  unclear 
passporting  requirements,  (ii)  insufficient  coordination  and  cooperation  between  authorities, 
(iii)  restrictive  requirements  for  the  provision  of  banking  services  related  to  settlement  in 
foreign currencies, (iv) unclear and complicated requirements for settlement discipline and (v) 
insufficient  information  about  the  activities  of  third-country  CSDs  in  the  EU.  The  policy 
options  were  assessed  against  the  specific  objectives  of  minimising  barriers  to  cross-border 
settlement,  reducing  administrative  burden  and  compliance  costs  without  endangering 
financial stability and ensuring adequate powers and information to monitor risks. 

28 

29 

30 

31 

32 

ESMA  Report  to  the  European  Commission,  ‘CSDR  Internalised  Settlement’,  5  November  2020, 
ESMA70-156-3729. 
ESMA Report to the European Commission, ‘Cross-border services and handling of applications under 
Article 23 of CSDR’, ESMA70-156-3569, 5 November 2020. 
ESMA  Report  to  the  European  Commission,  ‘Provision  of  banking-type  ancillary  services  under 
CSDR’, 8 July 2021, ESMA70-156-4582. 
ESMA Report to the European Commission, ‘Use of FinTech by CSDs’, 2 August 2021, ESMA70-156-
4576. 
“ESMA  Report  on  trends,  risks  and  vulnerabilities”,  European  Securities  and  Markets  Authority, 
ESMA-50-165-1287, No. 2, 2020.  

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The  Impact  Assessment  received  a  positive  opinion  with  comments  of  the  Regulatory 
Scrutiny  Board  on  29  October  2021  which  made  the  following  main  recommendations  for 
improvements: 

 

 

 

 

Clarify  the  interplay  between  the  revised  CSDR  and  the  Communication  on  “The 
European  economic  and  financial  system:  fostering  openness,  strength  and 
resilience”; 

Explain better why passporting, a practice successfully used in many other areas of 
financial law, does not seem to work in this segment; 

Explain the analysis that led to the introduction of mandatory buy-ins as an element 
of  the  settlement  discipline  regime  in  2014  and  how  the  Commission’s  assessment 
has changed since then;  

Clarify which policy options are complementary and which are mutually exclusive. 

The  requested  clarifications  were  added  in  the  relevant  sections  of  the  Impact  Assessment, 
i.e., regarding the Communication on open strategic autonomy in section 1.4.2, examples of 
burdensome passporting requirements faced by CSDs which hinder the provision of services 
cross-border in Annex 6, an explanation of the origin of mandatory buy-ins in Section 2.2.2 
and a clarification as to the complementary or mutually exclusive nature of the policy options 
in Section 6.  

Based  on  the  assessment  and  comparison  of  all  policy  options,  the  Impact  Assessment 
concluded on the following preferred policy options:  

 

 

 

Simplify  the  CSDR  passporting  process  by  removing  the  possibility  for  the  host 
supervisors  to  refuse  the  passport,  and  by  replacing  it  with  a  notification  from  the 
home  supervisors  to  the  host  supervisors.  The  preferred  policy  option  minimises 
barriers  to  cross-border  settlement  and  reduces  the  administrative  burden  and 
compliance  costs.  Other  policy  options  assessed  were  reducing  the  scope  of  the 
passporting  requirements  to  equity  securities  or  clarifying  the  role  and  powers  of 
competent  authorities  and  requirements  related  to  national  laws.  However,  both 
would only partially meet the objectives.  

Enhance  the  cooperation  between  national  supervisors  by  establishing  colleges  of 
supervisors to facilitate CSDs’ access to markets other than that of their authorisation 
and ensure financial stability by providing supervisors with more powers to monitor 
risks.  Other  options  considered  included  enhancing  the  existing  CSDR  rules  for 
cooperation  arrangements  and  introducing  more  supervision  of  CSDs  at  EU  level. 
However,  colleges  attain  the  right  balance  between  achieving  the  objectives  while 
reflecting  the  fact  that  supervisory  responsibility  remains  with  the  CSDs’  home 
Member State. 

Facilitate CSDs’ access to banking-type ancillary services by allowing CSDs with a 
banking  license  to  offer  such  services  to  other  CSDs  and  reviewing  the  thresholds 
below which CSDs may use a commercial bank. Another option considered was the 
removal of restrictions for the provision of banking-type ancillary services to CSDs, 
however  that  was  disregarded  as  potentially  increasing  significantly  the  risks  to 
financial stability. 

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 

 

 

A  combination  of  clarifying  various  elements  related  to  settlement  discipline  (e.g. 
scope)  and  modifying  the  timeline  for  the  implementation  of  mandatory  buy-ins33 
(“two-step approach”) is the most effective and efficient option. The implementation 
of mandatory buy-ins will be dependent on the evolution of settlement efficiency in 
the  EU.  First,  the  gathered  evidence  suggests  that  cash  penalties  will  incentivise 
improvements  in  settlement  efficiency,  without  endangering  stability  and  liquidity 
across markets and financial instruments. Second, after cash penalties have applied, 
it  can  then  be  assessed  how  to  best  apply  the  mandatory  buy-in  in  light  of  the 
evolution  of  settlement  efficiency.  The  option  to  suspend  the  framework  in  its 
entirety was disregarded as settlement fails in the EU remain consistently higher than 
in other major financial markets.  

Introduce an end date for the grandfathering clause for EU and third-country CSDs34 
and  a  notification  requirement  for  third-country  CSDs.  The  information  received 
would  allow  the  Commission  to  prioritise  its  assessment  of  equivalence  of  third-
country  CSD  frameworks,  as  the  granting  of  equivalence  by  the  Commission  is  a 
condition  for  the  recognition  by  ESMA  of  third-country  CSDs  that  wish  to  offer 
notary  and  central  maintenance  services  in  relation  to  financial  instruments 
constituted under the law of a Member State. The combination of these measures will 
therefore  ensure  that  authorities  have  adequate  powers  and  timely  information  to 
monitor risks in line with the evolution of market needs. Nonetheless, the proposed 
amendments  do  not  affect  the  equivalence  and  recognition  processes  already 
applicable  under  CSDR;  therefore,  third-countries  and  potential  applicant  third-
country  CSDs  remain  invited  to  submit  their  requests  for  equivalence  and 
applications  for  recognition  respectively  under  the  current  CSDR  requirements. 
Another  option  considered  was  to  enhance  the  regime  for  third-country  CSDs  that 
provide  services  for  financial  instruments  constituted  under  the  law  of  a  Member 
State  by,  for  e.g.,  requiring  recognition  by  ESMA  for  the  provision  of  settlement 
services  or  by  increasing  ESMA’s  supervisory  powers,  but  that  was  considered  at 
this point premature and disproportionate. 

The  overall  package  of  options  will  have  a  positive  effect  on  the  post-trading 
landscape in the EU by enabling a more proportionate regulation of CSDs, enhancing 
the efficiency of securities settlement and thus contributing to the competitiveness of 
the EU financial markets. 

• 

Regulatory fitness and simplification 

The  overall  approach  is  to  propose  measures  which  are  necessary  in  the  interest  of  market 
integration  and  financial  stability  while  reducing  the  regulatory  and  compliance  burden  for 
market  participants.  This  is  in  line  with  the  Commission's  Better  Regulation  Agenda.  The 
options retained have a  positive effect, ensuring more proportionate regulation of CSDs and 
enhancing the competitiveness of the EU settlement market as a whole. 

33 

34 

If  a  transaction  has  failed  to  settle  at  the  end  of  a  prescribed  period,  a  mandatory  buy-in  process  is 
initiated by the buyer of the securities who is forced to repurchase them elsewhere. The failing party is 
required to meet any price differential between the original and new transaction and all costs of the buy-
in. 
According to Article 69(4) of CSDR until national competent authorities and ESMA have authorised or 
recognised  and  EU  or  third-country  CSDs  respectively  pursuant  to  CSDR,  the  national  rules  on 
authorisation and recognition applicable before CSDR entered into force continue to apply. 

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CSDs would benefit from reduced costs when operating in the EU, notably due to a reduction 
of barriers to cross-border settlement stemming from (i) the establishment of colleges and (ii) 
the  simplification  of  the  current  passporting  procedure.  In  particular,  easing  the  burdens 
associated with the passporting requirements would simplify and accelerate the process. The 
simplified  passporting  process,  which  includes  a  notification  to  host  competent  authorities 
rather than an approval by them, is expected to reduce the costs by up to 75%, which would 
generate a one-off saving, on average, of EUR 585 000 per CSD. The introduction of colleges 
would  also  benefit  EU  CSDs  due  to  the  legal  certainty  resulting  from  the  enhancement  of 
supervisory convergence. Furthermore, the introduction of colleges and of an end date to the 
grandfathering  clause  would  enhance  financial  stability  with  regard  to  EU  CSDs  and  third-
country CSDs.  

Simplification of the requirements to access banking-type ancillary services by CSDs, which 
is  required  in  order  to  settle  in  foreign  currencies,  would  also  increase  competition  in  this 
domain. In this regard, a review of the threshold below which CSDs can use for such services 
credit institutions could enable CSDs to  develop  further their services  to  domestic investors 
and  cross-border.  It  is  estimated  that  EUR 16 billion  of  additional  settlement  in  foreign 
currencies could be expected on an annual basis as a result of the proposed changes.  

The  simplification  of  the  passporting  procedure,  the  creation  of  mandatory  colleges  and  the 
increased  provision  of  banking  services  related  to  settlement  in  foreign  currencies  will 
increase  competition  between  CSDs  in  the  EU,  thereby  benefitting  investors  and  issuers, 
SMEs  included.  Overall,  issuers,  in  particular  innovative  start-ups  and  SMEs,  and  investors 
would  have  more  choice  in  terms  of  financing  arrangements  and  would  benefit  from  the 
increased  competition,  a  greater  choice  in  issuance,  risk  diversification  and  currency 
diversification  in  their  cross-border  investments,  thereby  contributing  to  a  deepening  of  the 
CMU.  

Finally,  the  proposed  changes  to  the  settlement  discipline  regime  would  ensure  a  more 
proportionate  approach  to  the  treatment  of  settlement  fails,  while  ensuring  that  levels  of 
settlement  efficiency  continue  to  improve  in  the  EU  to  the  benefit  of  investors  and  the  EU 
economy as a whole. The two-step approach in particular should alleviate the most negative 
impacts  related  to  liquidity,  where  application  of  the  relevant  requirements  is  not  justified. 
This should indirectly positively impact SMEs, whose securities are less liquid. 

Digitalisation  and  the  impact  of  new  technologies  on  post-trade  services  have  not  been 
addressed  in  in  this  initiative  as  they  have  been  deemed  out  of  scope.  The  targeted 
consultation supporting this initiative indicated that stakeholders prefer to gather experiences 
in  applying  the  DLT  pilot  regime  Regulation  before  any  changes  to  the  CSDR  are 
contemplated.  ESMA  in  its  report  on  the  use  of  Fintech  by  CSDs,  also  did  not  support 
extensive  amendments  to  CSDR  at  this  point  in  time  to  facilitate  the  use  of  technological 
innovation by CSDs, but rather suggested to wait for the experiences of the EU pilot regime. 
It was  hence decided  that any  fundamental  changes to CSDR to realise the full  potential of 
technology will be postponed until lessons can be drawn from the implementation of the DLT 
pilot regime Regulation. 

• 

Fundamental rights 

The EU is committed to high standards of protection of fundamental rights and is signatory to 
a broad set of conventions on human rights. In this context, the proposal is not likely to have a 
direct  impact  on  these  rights,  as  listed  in  the  main  United  Nations  conventions  on  human 

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rights, the Charter of Fundamental Rights of the European Union which is an integral part of 
the EU Treaties, and the European Convention on Human Rights.  

4. 

BUDGETARY IMPLICATIONS 

The proposal will have no implications for the budget of the Union. 

ESMA would mainly be impacted by the participation to colleges, the development or update 
of  5  technical  standards  and  the  management  of  the  process  for  the  notification  by  third-
country CSDs of their EU activities. The latter would however be a small one-off cost. The 
simplification of the passporting procedure would nevertheless alleviate ESMA’s costs as the 
passporting requirements would be simpler and clearer. Furthermore, a clear determination of 
transactions falling within the scope of the settlement discipline regime would also lessen the 
administrative burden on ESMA related to replying to Q&As. Moreover, the adaptation in the 
periodicity  of  the  reports  that  ESMA  is  required  to  submit  to  the  Commission  will  further 
reduce the administrative burden imposed on the Authority. ESMA would also benefit from 
some of the preferred policy options which would strengthen the supervisory environment, in 
particular the notification process for third-country CSDs. 

The proposed tasks for ESMA will therefore not require the establishment of additional posts 
and can be carried out with existing resources. The same is also true for the EBA that will be 
required to develop one technical standard determining the threshold below which CSDs may 
use credit institutions for the provision of banking-type ancillary services. 

5. 

• 

OTHER ELEMENTS 

Implementation plans and monitoring, evaluation and reporting arrangements 

The proposal includes a requirement that the Commission reports to the European Parliament 
and to the Council on the application of CSDR in its entirety, with a focus on its effectiveness 
and  efficiency  in  meeting  its  objectives  (i.e.  improve  the  efficiency  and  safety  of  EU 
settlement markets).  When doing so, the  Commission  should consider all aspects of CSDR, 
including whether there are other substantive barriers to competition in relation to the services 
subject to this Regulation which should be addressed, the need to apply further measures to 
improve settlement efficiency and the potential need for further measures to limit the impact 
on taxpayers of the failure of CSDs.  

In  principle,  this  evaluation  should  take  place  within  five  years  after  the  entry  into  force  of 
these amendments.  Input would also be required from ESMA as well as national authorities 
and central banks. Statistical data for the analysis should be sought primarily from ESMA. 

• 

Detailed explanation of the specific provisions of the proposal 

5.2.1 Definitions 

Article  1(1)  introduces  a  definition  of  the  notion  of  group  of  undertakings,  in  line  with  the 
definition in Regulation (EU) No 2019/2033.  

5.2.2 Settlement discipline regime 

Article 1(2) introduces amendments to the settlement discipline regime. 

In  point  (a),  amendments  to  Article  7(2)  of  CSDR  provide  that  in  situations  where  a 
settlement  fail  is  caused  by  factors  not  attributable  to  the  participants  to  the  transaction  or 

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where a transaction does not involve two trading parties, such settlement fail is not subject to 
the penalty mechanism.  It  also  specifies  that cash penalties should be calculated  either until 
the end of the buy-in process if the Commission has adopted the relevant implementing act or 
until the actual settlement date, whichever is earlier.  

Point  (b)  introduces  a  new  paragraph  2a  according  to  which  the  Commission  may  adopt  an 
implementing act,  according with  the examination procedure set  out  in Regulation  (EU) No 
182/2011, deciding to apply mandatory buy-ins to certain financial instruments or categories 
of  transactions  mandatory  buy-ins  should  apply.  The  Commission  may  take  that  decision 
where it considers that those measures constitute a proportionate means to address the level of 
settlement  fails  in  the  Union  and  that,  based  on  the  number  and  volume  of  settlement  fails, 
certain conditions set out in that provision are met.  

In point (c), the amendment to Article 7(3) of CSDR specifies when, the buy-in process shall 
be initiated where the Commission has adopted an implementing act pursuant to Article 7(2a) 
and  that  the  extension  period  for  financial  instruments  traded  on  an  SME  growth  market  is 
calculated on the basis of calendar days.  

Point  (d)  introduces  a  new  paragraph  3a  in  Article  7  of  CSDR  to  explain  how  the  pass-on 
mechanism will work. A pass-on mechanism will prevent a cascade of failed settlements each 
requiring  a  separate  buy-in  process  by  allowing  each  participant  in  the  transaction  chain  to 
pass-on a buy-in notification to the failing participant such that only one buy-in is necessary 
to  resolve  the  whole  chain  of  transactions.  This  pass-on  mechanism  can  then  be  replicated 
contractually between the participants and their clients until the ultimate buyers and sellers.  

Point (e) amends Article 7(4) of CSDR providing that in situations where a settlement fail is 
caused by factors not attributable to the participants to the transaction or where a transaction 
does not involve two trading parties, such settlement fail is not subject to the mandatory buy-
in mechanism.  

Point (f) amends Article 7(6) of CSDR introducing symmetry of payments between the buyer 
and the seller in case the economic terms of the transaction at execution of the buy-in differ 
from the original transaction. The objective is to ensure that the buy-in restores the parties to 
the transaction to the same economic position had the original transaction taken place.  

Point  (g),  amends  Article  7(11)  of  CSDR  clarifying  that  the  exemption  to  the  settlement 
discipline  requirements  for  CCPs  only  applies  when  the  CCP  interposes  itself  between 
counterparties.  It  also  clarifies  that  if  CCPs  incur  losses  from  the  application  of  mandatory 
buy-ins, they may establish in their rules a mechanism to cover such losses. 

Point (h) introduces  a new 13a in  Article 7 of  CSDR which confers to  the Commission  the 
power to suspend the buy-in mechanism for specific categories of financial instruments where 
necessary  to  avoid  or  address  a  serious  threat  to  financial  stability  or  to  the  orderly 
functioning of financial markets in the Union. This new paragraph 13a sets out the procedure 
that  should  be  followed  by  the  Commission  for  such  a  suspension,  i.e.  following  a 
recommendation  by  ESMA  after  consulting  the  ESCB  and  the  ESRB.  It  also  specifies  that 
such a suspension shall be valid for a maximum period of six months, renewable by periods of 
three months for a maximum total period of 12 months from the beginning of the suspension.  

In  point  (i),  amendments  to  Article  7(14)  of  CSDR  clarify  that  the  delegated  act  of  the 
Commission  specifying  the  parameters  for  the  calculation  of  a  deterrent  and  proportionate 
level of the cash penalties shall take into account the effects of negative interest rates.  

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Point (j) introduces a new paragraph 14a in Article 7 of CSDR empowering the Commission 
to  specify  the  situations  where  a  settlement  fail  should  be  considered  as  being  caused  by 
factors  not  attributable  to  the  participants  and  where  a  transaction  does  not  involve  two 
trading parties, as per the amendments introduced in paragraphs 2 and 4 of Article 7.  

Point  (k),  amends  Article  7(15)  of  CSDR  introducing  a  new  date  by  which  ESMA  shall 
submit  regulatory  technical  standards  specifying  those  aspects  of  the  settlement  discipline 
regime listed in that same paragraph. This change of the date should allow ESMA to revise 
the regulatory technical standards to take into account the changes made to CSDR following 
this review and make any necessary amendments with a view to clarify the requirements set 
out  in  such  regulatory  technical  standards,  such  as  the  conditions  under  which  participants 
may execute their own buy-ins.  

5.2.3  Cooperation  between  competent  authorities  and  relevant  authorities,  review  and 

evaluation and recovery and orderly wind-down strategies.  

Article 1(3) amends paragraphs (b) and (c) of Article 12 of CSDR with a view to clarify that 
where a CSD does not carry out settlement activity before the beginning of the authorisation 
process, the criteria determining which relevant authorities should be involved in that process 
shall take into account the anticipated settlement activity.  

Point  (b)  of  Article  1(4)  amends  Article  17(4)  of  CSDR  on  the  consultation  of  relevant 
authorities by  competent authorities regarding the authorisation process  for  a CSD.  In point 
(e)  Article  1(6),  introduces  equivalent  amendments  to  Article  22(6)  of  CSDR,  on  the 
consultation  of  relevant  authorities  by  competent  authorities  regarding  the  review  and 
evaluation  process.  The  changes  in  Articles  17(4)  and  22(6)  of  CSDR  introduce  a  process 
whereby  the  consulted  authorities  may  issue  a  reasoned  opinion  within  three  months  of  the 
receipt of the information by the competent authority. In case of negative opinion by one of 
the relevant authorities consulted, the competent authority shall address such negative opinion 
in a reasoned decision, which may again be subject to a negative opinion from the consulted 
authorities. If the competent authority disagrees with that negative opinion it will inform those 
authorities  that  objected  and  the  latter  may  refer  the  matter  to  ESMA.  If  the  matter  is  not 
resolved  within  30  days  after  such  referral,  the  competent  authority  shall  take  the  final 
decision  on  the  review  and  evaluation  and  provide  a  detailed  explanation  of  its  decision  in 
writing to the relevant authorities.  

Point (c) of Article 1(4) inserts a new paragraph (7a) in Article 17 of CSDR to introduce new 
requirements  for  competent  authorities  to  share  information  with  other  authorities,  notably 
relevant authorities.  

Article 1(5) amends Article 20(5) of CSDR, clarifying that the procedures that the CSD must 
have  in  place  in  the  event  of  a  withdrawal  of  authorisation  shall  include  the  transfer  of 
issuance  accounts  and  records  maintained  for  the  provision  of  core  services  referred  to  in 
points 1 and 2 of Section A of the Annex.  

Article 1(6) amend paragraphs 1, 4 and 7 of Article 22 of CSDR with a view to change the 
periodicity of the review and evaluation process,  from a  yearly basis to every two  years.  In 
addition, it amends paragraphs 2 and 3 of Article 22 of CSDR in order to clarify how CSDs 
should prepare to face scenarios that may potentially prevent them from being able to provide 
their critical operations and services as a going concern. The requirement to draw resolution 
plans is removed since it is deemed unclear and no Union resolution regime on the basis of 
which  a  resolution  plan  could  be  drafted  currently  exists.  Instead,  the  revised  paragraph  2 
requires  CSDs  to  prepare  and  submit  to  the  competent  authority  appropriate  plans  for  their 

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recovery  or  orderly  wind-down.  The  revised  paragraph  3  specifies  the  minimum  content  of 
the  plans  referred  to  in  paragraph  2  as  well  as  the  periodicity  for  the  review  and  update  of 
such plans (at least every two years). It also clarifies that such plans shall have regard to the 
size, systemic importance, nature, scale and complexity of the activities of the CSD concerned 
and any relevant recovery or resolution plan established in accordance with the BRRD. The 
changes  to  paragraph  3  do  not  affect  the  requirement  for  competent  authorities  to  inform 
ESMA where a resolution plan is established and maintained for a CSD. This can be the case 
due to national legislation or the requirement  to  comply with other pieces of EU legislation 
such as the BRRD.  

Point (c) of Article 1(6) amends Article 22(11) of CSDR by introducing a new date by which 
ESMA  shall  submit  draft  regulatory  technical  standards  to  the  Commission  to  specify 
standard forms,  templates and procedures for the review and  evaluation.  This  change of the 
date should allow ESMA to adapt, where necessary, the regulatory technical standards to the 
changes made to CSDR following this initiative.  

Finally,  Article  1(18)  amends  Article  55  of  CSDR  in  order  to  extend  the  deadline  within 
which  relevant  authorities  and  competent  authorities  can  issue  a  reasoned  opinion  on  the 
authorisation to provide banking-type ancillary from one months to two months. Indeed, the 
one-month deadline is too short for the issuance of such an opinion.  

5.2.4 Passporting regime and corporate or similar law of the Member State under which the 

securities are constituted 

Article  1(15)  amends  the  second  subparagraph  of  Article  49(1)  of  CSDR  with  a  view  to 
clarify that the  corporate or similar law of the Member State under which the securities are 
constituted  and  which  shall  continue  to  apply  in  the  context  of  cross-border  issuances  of 
securities includes both: (i) the corporate or similar law of the Member State where the issuer 
is established and (ii) where different, the governing corporate or similar law under which the 
securities are issued. This covers notably the case of bonds issued by an issuer located in one 
Member State but contractually subject to the law of another Member State. Article 1(15) also 
amends  the  third  subparagraph  of  Article  49(3)  of  CSDR  to  include  a  requirement  for 
Member States to update the list of relevant provisions on a regular basis.  

Article  1(7)  amends  Article  23  of  CSDR  in  order  to  clarify  the  following  aspects  of  the 
passporting process.  

First, it adapts the cross-reference to the second subparagraph of Article 49(1), in paragraphs 
(2) and (3) of Article 23, such that a CSD wishing to provide notary or central maintenance 
services in relation to financial instruments constituted under the law of another Member State 
shall take into account both the law of the Member State where the issuer is established and, 
where different, the governing corporate or similar law under which the securities are issued.  

Second, it amends Article 23(2) of CSDR to allow new CSDs to proceed with a passporting 
request in parallel with an authorisation application, so that they may start their cross-border 
activity  from  the  date  of  authorisation  by  their  home  competent  authority  provided  that  at 
least one month has passed from the date of the communication of the passporting request by 
the home competent authority to the host competent authority. 

Third, it amends Article 23(3), point (e) of CSDR to clarify that a CSD requesting a passport 
should always provide an assessment of the measures it intends to take to allow its users to 
comply with the national law referred to in Article 49(1).  

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Fourth, it amends Article 23(4) of CSDR, to shorten the period of time under which a home 
competent  authority  shall  communicate  the  passporting  request  to  the  host  competent 
authority.  

Fifth, it amends Article 23(6) removing the possibility for a host competent authority to refuse 
a passporting request. Under the revised provision, the CSD may start providing services after 
one  month  from  the  date  of  the  communication  of  the  passporting  request  by  the  home 
competent  authority  to  the  host  competent  authority,  or  earlier  if  agreed  upon  by  the  host 
competent authority.  

5.2.5 Colleges of supervisors 

Article  1(9)  introduces  Article  24a  in  CSDR  as  part  of  a  new  Section  4a  in  Title  III  on  the 
cooperation  of  authorities  through  colleges,  requiring  the  establishment  of  colleges  of 
supervisors in two cases: 

(a)  where a CSD is subject to the passporting procedure of Article 23(3) to (7), i.e. 

the so-called “passporting college”; or 

(b)  where  a  CSD  is  part  of  a  corporate  group  comprising  two  or  more  CSDs 
authorised  in  at  least  two  Member  States,  i.e.  the  so-called  “group-level 
college”.  

Where  a  CSD  subject  to  the  passporting  procedure  of  Article  23(3)  to  (7)  is  also  part  of  a 
corporate  group that  comprises at least another  CSD, it should be possible to establish only 
one college for that CSD rather than two separate colleges (i.e. a separate passporting college 
and a separate group-level college), to ensure synergies and avoid unnecessary administrative 
burden on the authorities involved.  

The establishment of only one college should also be possible where the other CSDs within 
the  group  are  subject  to  the  passporting  procedure,  to  avoid  a  situation  where  there  are 
multiple passporting colleges and a separate group-level college for CSDs that are part of the 
same  group  and  which,  in  many  cases,  have  common  procedures,  share  resources, 
assessments of the measures they have put in place to ensure compliance with host Member 
State laws where they provide services cross-border etc. Nonetheless, where those other CSDs 
within the group are also subject to the passporting procedure, the establishment of just one 
college  for  the  whole  group  shall  be  possible  only  with  the  agreement  of  those  CSDs’ 
competent authorities.  

In addition, Article 24a establishes the rules on the determination of the  chair especially for 
the group-level college, the composition of the colleges and their tasks to ensure a coherent 
supervisory  approach  across  the  EU.  ESMA  is  empowered  to  develop  draft  regulatory 
technical standards specifying the practical arrangements for the operation of colleges. 

Finally,  amendments  are  introduced  throughout  the  Regulation  to  ensure  that  colleges  are 
informed of important decisions taken in respect of CSDs (i.e. amendments to Article 22(7), 
paragraphs (4), (5) and (7) of Article 23, paragraphs (1) and (5) of Article 24, paragraphs (1) 
and (2) of Article 60 of CSDR.)  

5.2.6 Third-country CSDs and end of the grandfathering clause 

Article  1(10)  amends  Article  25  of  CSDR  which  sets  out  the  framework  for  third-country 
CSDs. Point (a) introduces a requirement for CSDs that intend to provide settlement services 
in relation to financial instruments constituted under the law of a Member State to submit a 

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notification  to  ESMA,  thereby  addressing  the  lack  of  information  in  this  regard  at  both 
national and EU  level.  Point (c) empowers  ESMA to draft regulatory technical standards to 
specify the information that the third-country CSD shall provide to ESMA in that notification, 
specifies that such information shall be limited to what is strictly necessary and provides a list 
of examples.  

Point  (b)  of  Article  1(10)  amends  the  fifth  subparagraph  of  Article  25(6)  specifying  that 
ESMA  shall  inform  the  third-country  CSD  applying  for  recognition  to  provide  notary  or 
central maintenance services in writing with a fully reasoned decision whether the recognition 
has been granted or refused within six months from the latter date between the submission of 
a complete application and the adoption of an equivalence decision by the Commission. 

Article 1(23) amends Article 69(4) of CSDR by introducing an end-date to the grandfathering 
clause for both EU and third-country CSDs. More specifically, point (a) amends Article 69(4) 
by setting out  that the  end-date for the  grandfathering clause for EU CSDs  that shall be  the 
one year from the entry into force of this Regulation. Point (b) introduces a new paragraph 4a 
which sets out an end-date to the grandfathering clause for third-country CSDs, which shall be 
three years from the entry into force of this Regulation due to the equivalence and recognition 
processes. In addition, third-country CSDs benefitting from the grandfathering clause shall be 
required  to  submit  a  notification  to  ESMA  when  offering  notary  and  central  maintenance 
services  in  relation  to  financial  instruments  constituted  under  the  law  of  a  Member  State  to 
address  the  lack  of  information  in  this  regard  both  at  national  and  at  EU  level.  Point  (b) 
empowers  ESMA  to  draft  regulatory  technical  standards  to  specify  the  information  that  the 
third-country  CSD  shall  provide  to  ESMA  in  that  notification  and  specifies  that  such 
information  shall  be  limited  to  what  is  strictly  necessary  and  provides  a  list  of  examples. 
Similarly,  a  notification  requirement  is  also  introduced  for  those  third-country  CSDs  that 
offered settlement services before the entry into force of this Regulation.  

5.2.7 Banking-type ancillary services 

First, Article 1(13) amends Article 40(2) of CSDR and point (a) of Article 1(17) amends point 
(b)  of  Article  54(2)  of  CSDR  in  order  to  introduce  the  possibility  for  CSDs  authorised  to 
provide  banking-type  ancillary  services  to  provide  such  services  to  CSDs  that  have  not 
obtained  this  authorisation  and  which,  therefore,  cannot  settle  in  specific  currencies  above 
certain amounts where they do not have access to the relevant central bank.  

Point (b) of Article 1(17) amends the introductory wording of paragraph 4, thereby enabling 
CSDs to seek the provision of banking-type ancillary services not only from designated credit 
institutions  but  also  from  other  CSDs  that  have  been  authorised  to  provide  such  services 
pursuant to Article 54(3), whether those CSDs are part of the same corporate group or not. In 
this  regard,  point  (b)  of  Article  1(17)  deletes  point  (c)  of  Article  54(4)  of  CSDR,  thereby 
eliminating the prohibition that designated credit institutions cannot offer core CSD services.  

Second, point (c) of Article 1(17) amends Article 54(5) of CSDR which provided a specific 
threshold in CSDR under which CSDs could use a credit institution for banking services. In 
order to adequately calibrate this threshold and with a view of managing financial risks, point 
(d)  of  Article  1(17)  introduces  a  mandate  for  the  EBA,  in  cooperation  with  the  ESCB  and 
ESMA,  to  develop  draft  regulatory  technical  standards,  to  be  adopted  by  the  Commission, 
setting an appropriate threshold below which banking-type ancillary services can be provided 
by credit institutions, including relevant risk management and prudential standards, mitigating 
potential risks from amending the threshold.  

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Finally,  Article  1(19)  amends  Article  59(4)  of  CSDR  to  ensure  adequate  prudential 
requirements, ensuring consistency with other applicable legislation or making more explicit 
certain requirements to ensure supervisory consistency or specify a number of smaller issues 
in the area of risk management. To that effect point (a):  

(a) 

(b) 

(c) 

(d) 

(e) 

amends point (c) of Article 59(4) making it explicit and bringing it in line with 
the existing regulatory standards that for the liquidity stress scenario qualifying 
liquid resources should be maintained instead of liquid resources and the stress 
scenario should consider the largest two participants instead of only the largest 
one.  

amends  point  (d)  of  Article  59(4)  clarifying  that  qualifying  liquid  resources 
should be maintained for the relevant currencies instead of for all currencies.  

amends points (e) of Article 59(4), clarifying that in case prearranged funding 
arrangements  are  used,  these  should  be  highly  reliable.  It  also  makes  explicit 
that  when  similar  arrangements  to  committed  arrangements  are  used  these 
should be held against the same standard of highly reliable and held with only 
creditworthy credit institutions.  

amends point (i) of Article 59(4) clarifying that a CSD can convert into cash, 
instead of ‘liquidate’, any collateral provided by the defaulting client, and that, 
where  non-committed  arrangements  are  used,  a  CSD  should  be  able  to 
establish that any associated potential risks have been identified and mitigated. 
The  objective  is  to  allow  uncommitted  arrangements  on  the  condition  that  a 
comprehensive framework is in place.  

inserts a new point (k) in Article 59(4) to make more explicit that CSDs should 
cover  relevant  risks  in  their  risk  management  and  prudential  frameworks, 
including  relevant  netting  arrangements.  This  should  ensure  that  credit  and 
liquidity  risks  in  relation  to  netting  arrangements  are  properly  managed  by 
CSDs.  This  requirement  should  be  further  clarified  in  the  existing  RTS 
developed by the EBA in accordance with Article 59(5).  

5.2.8 Organisational requirements and links 

Point  (a)  of  Article  1(4)  inserts  a  new  subparagraph  in  Article  17(2)  of  CSDR  in  order  to 
allow a competent authority, where an applicant CSD does not comply with all requirements 
of CSDR at the time of application but can be reasonably assumed that it will do so when it 
will  actually  launch  its  activities,  to  grant  the  authorisation  to  that  CSD  subject  to  the 
condition that the CSD has all necessary arrangements in place to comply with CSDR when it 
actually launches its activities.  

Article 1(11) inserts a new paragraph 3a in article 27 of CSDR in order to clarify the meaning 
of the term ‘independent member of the management body’ in the context of that article.  

Article  1(12)  amends  paragraph  3  of  Article  28  of  CSDR  in  order  to  clarify  and  ensure  the 
consistency of interpretation of the notion of ‘service level’, by adding a list of examples of 
the topics that it should cover.  

Article 1(32) amends Article 36 of CSDR with a view to clarify that CSDs should not only 
reduce the  risks  associated with  the safekeeping  and settlement  of transactions in securities, 
but should seek to minimise them. The term ‘reduce’ is therefore replaced by ‘minimise’.  

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Article 1(16) amends Article 52(1) of CSDR in order to ensure that a receiving CSD will not 
unnecessarily delay the operation of an authorised link. The receiving CSD should therefore 
be required to implement the link within 12 months.  

5.2.9 ESMA reports 

Article 1(24) introduces changes to Article 74 of CSDR in order to better adapt the periodicity 
of the reports that ESMA shall submit to the Commission.  

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2022/0074 (COD) 

Proposal for a 

REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL 

amending Regulation (EU) No 909/2014 as regards settlement discipline, cross-border 
provision of services, supervisory cooperation, provision of banking-type ancillary 
services and requirements for third-country central securities depositories 

(Text with EEA relevance) 

THE EUROPEAN PARLIAMENT AND THE COUNCIL OF THE EUROPEAN UNION, 

Having  regard  to  the  Treaty  on  the  Functioning  of  the  European  Union,  and  in  particular 
Article 114 thereof, 

Having regard to the proposal from the European Commission, 

After transmission of the draft legislative act to the national parliaments, 
Having regard to the opinion of the European Central Bank35, 
Having regard to the opinion of the European Economic and Social Committee36,  

Acting in accordance with the ordinary legislative procedure, 

Whereas: 

(1) 

(1) 

35 
36 
37 

Regulation  (EU)  No  909/2014  of  the  European  Parliament  and  of  the  Council37  was 
published  in  the  Official  Journal  of  the  European  Union  on  28  August  2014,  and 
entered  into  force  on  17 September 2014.  It  standardises  the  requirements  for  the 
settlement of financial instruments and rules on the organisation and conduct of central 
securities depositories (CSDs) to promote safe, efficient and smooth settlement. That 
Regulation introduced shorter settlement periods, settlement discipline measures, strict 
organisational,  conduct  of  business  and  prudential  requirements  for  CSDs,  increased 
prudential  and  supervisory  requirements  for  CSDs  and  other  institutions  providing 
banking  services  that  support  securities  settlement,  and  regime  allowing  authorised 
CSDs to provide their services across the Union. 

A  simplification  of  the  requirements  in  certain  areas  covered  by  Regulation 
(EU) No 909/2014,  and  a more proportionate approach to  those areas, is in  line with 
the  Commission's  Regulatory  Fitness  and  Performance  (REFIT)  programme  which 
emphasises  the  need  for  cost  reduction  and  simplification  so  that  Union  policies 
achieve their objectives  in  the most efficient  way, and aims  in  particular at  reducing 
regulatory and administrative burdens. 

OJ C […], […], p. […]. 
OJ C , , p. . 
Regulation  (EU)  No  909/2014  of  the  European  Parliament  and  of  the  Council  of  23  July  2014  on 
improving  securities  settlement  in  the  European  Union  and  on  central  securities  depositories  and 
amending  Directives  98/26/EC  and  2014/65/EU  and  Regulation  (EU)  No  236/2012  (OJ  L  257, 
28.8.2014, p. 1). 

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(2) 

(3) 

(4) 

Efficient  and  resilient  post-trading  infrastructures  are  essential  elements  for  a  well-
functioning Capital Markets Union and they deepen the efforts to support investments, 
growth and jobs in line with the political priorities of the Commission. For this reason, 
the Commission Capital Markets Union Action Plan adopted in 202038 included as one 
of its key actions the review of Regulation (EU) No 909/2014. 

In  2019,  the  Commission  carried  out  a  targeted  consultation  on  the  application  of 
Regulation (EU) No 909/2014.The Commission also received input from the European 
Securities  and  Markets  Authority  (‘ESMA’)  and  the  European  System  of  Central 
Banks  (‘ESCB’).  It  appeared  from  the  consultations  that  stakeholders  support  and 
consider  as  relevant  the  objectives  of  that  Regulation,  i.e.  to  promote  safe,  efficient 
and  smooth  settlement  of  financial  instruments,  and  that  no  major  overhaul  was 
necessary. On 1 July 2021, the Commission adopted a review report39 in accordance 
with  Article 75  of  Regulation  (EU)  No  909/2014.  Although  not  all  the  provisions  of 
that Regulation are fully applicable yet, the report identified areas for which targeted 
action  is  necessary  to  ensure  that  its  objectives  are  reached  in  a  more  proportionate, 
efficient and effective manner. 

include 

transaction  settlement.  Such  rules 

Regulation (EU) No 909/2014 has introduced rules on settlement discipline to prevent 
and address failures in the settlement of securities transactions and therefore ensure the 
in  particular  reporting 
safety  of 
requirements, a cash penalties regime and mandatory buy-ins. Despite the absence of 
experience  in  applying  those  rules,  the  development  and  specification  of  the 
framework  in  Commission  Delegated  Regulation  (EU)  2018/122940  has  allowed  all 
interested  parties  to  better  understand  the  regime  and  the  challenges  its  application 
could give rise to. In this regard, the scope of cash penalties and mandatory buy-ins set 
out in Article 7 of Regulation (EU) No 909/2014 should be clarified, in particular by 
specifying  which  categories  of  transactions  are  excluded.  Such  exclusions  should 
cover  in  particular  transactions  that  failed  for  reasons  not  attributable  to  the 
participants  and  transactions  that  do  not  involve  two  trading  parties,  for  which  the 
application of cash penalties or mandatory buy-ins would not be practicable or could 
lead to detrimental consequences for the market, such as certain transactions from the 
primary  market,  corporate  actions,  reorganisations,  creation  and  redemption  of  fund 
units  and  realignments.  The  Commission  should  be  empowered  to  supplement 
Regulation (EU) No 909/2014 by further specifying the details of such exclusions by 
means of a delegated act. 

(5) 

The overarching objective of the settlement discipline regime is to improve settlement 
efficiency  within  the  Union.  However,  the  market  volatility  in  2020  amplified 
concerns  about  the  potential  negative  effects  of  mandatory  buy-in  rules,  both  in 
normal and stressed market conditions. The application of those rules should therefore 

38 

39 

40 

Communication  from  the  Commission  to  the  European  Parliament,  the  Council,  the  European 
Economic  and  Social  Committee  and  the  Committee  of  the  Regions,  ‘A  Capital  Markets  Union  for 
people and businesses-new action plan’, COM(2020/) 590. 
Report  from  the  Commission  to  the  European  Parliament  and  the  Council  under  Article  75  of 
Regulation  (EU)  No  909/2014  of  the  European  Parliament  and  of  the  Council  of  23  July  2014  on 
improving  securities  settlement  in  the  European  Union  and  on  central  securities  depositories  and 
amending  Directives  98/26/EC  and  2014/65/EU  and  Regulation  (EU)  No  236/2012  (COM(2021)  348 
final). 
Commission  Delegated  Regulation  (EU)  2018/1229  of  25  May  2018  supplementing  Regulation  (EU) 
No  909/2014  of  the  European  Parliament  and  of  the  Council  with  regard  to  regulatory  technical 
standards on settlement discipline (OJ L 230, 13.9.2018, p. 1).– 

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be subject to an assessment by the Commission as to its appropriateness in the light of 
the  evolution  of  settlement  efficiency  in  the  Union.  Cash  penalties  and  reporting 
requirements  should  however  continue  to  apply  in  order  to  assess  their  impact  on 
improving  settlement  efficiency  in  the  Union.  Considering  the  potential  impacts  of 
mandatory buy-in rules, such rules should apply only where certain conditions are met, 
namely  where  the  application  of  cash  penalties  has  not  resulted  in  a  long-term, 
continuous  reduction  of  settlement  fails  in  the  Union,  where  settlement  efficiency  in 
the Union has not reached appropriate levels considering the situation in third-country 
capital  markets  that  are  comparable in  terms of  size, liquidity  as well as  instruments 
traded  and  types  of  transactions  executed  on  such  markets,  or  where  the  level  of 
settlement fails in the Union has or is likely to have a negative effect on the financial 
stability of the Union. Where the Commission considers that any of those conditions is 
met and that the application of mandatory buy-ins is proportionate to address level of 
settlement  fails  in  the  Union,  the  Commission  should  be  empowered  to  adopt  an 
implementing  act  determining  for  which  financial  instruments  or  categories  of 
transactions  the  mandatory  buy-in  rules  should  start  to  apply.  The  cash  penalties 
referred to in the third subparagraph of Article 7(2) of Regulation (EU) No 909/2014 
should be calculated on a daily basis for each business day that a transaction fails to be 
settled until the end of the buy-in process or the actual settlement day, whichever is the 
earlier.  

(6) 

To avoid a multiplicity of buy-ins for a transactions on the same financial instrument 
along a chain of counterparties, which could trigger unnecessary duplicative costs and 
could affect the liquidity of the financial instrument, a ‘pass-on’ mechanism should be 
available  to  participants  in  such  transactions.  Each  participant  involved  in  the 
transaction chain should be allowed to pass-on a buy-in notification to the participant 
failing to them until it reaches the original failing participant. 

(7)  Mandatory  buy-ins  and  cash  compensation  processes  allow  for  the  payment  of  the 
difference between the buy-in price and the original  trade price to be made from the 
seller to the purchaser only where that buy-in or cash compensation reference price is 
higher than the original trade price. This asymmetry for the payment of the differential 
could  create  an  unequitable  remedy  that  would  unduly  benefit  the  purchaser  in  the 
event  that  the  buy-in  or  reference  price  is  lower  than  the  original  trade  price.  The 
payment of the differential between the buy-in price and the original trade price should 
therefore apply in both directions to ensure that the trading parties are restored to the 
economic terms, had the original transaction taken place. 

(8) 

The settlement discipline regime set out in Article 7 of Regulation (EU) No 909/2014 
should  not  apply  to  a  failing  participant,  which  is  a  central  counterparty  (‘CCP’)  as 
defined  in  Regulation  (EU)  No  648/2012  of  the  European  Parliament  and  of  the 
Council41. However, for transactions entered into by a CCP where it does not interpose 
itself  between  counterparties,  such  as  permitted  use  of  collateral  for  investment 
purposes, the CPP should be subject to the settlement discipline regime like any other 
participant. 

(9)  Where  the  mandatory  buy-ins  apply,  it  should  be  possible  for  the  Commission  to 
temporarily  suspend  their  application  in  certain  exceptional  situations.  Such  a 
suspension  should  be  possible  for  specific  categories  of  financial  instruments  where 

41 

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 (OJ L 201, 27.7.2012, p. 1). 

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necessary  to  avoid  or  address  a  serious  threat  to  financial  stability  or  to  the  orderly 
functioning  of  financial  markets  in  the  Union.  Such  a  suspension  should  be 
proportionate to those aims. 

(10)  The context of negative interest rates should be taken into account in the delegated act 
for the calculation of cash penalties  in  order to  avoid  unintended effects  on the non-
failing participant by eliminating any adverse incentives to fail that may arise in a low 
or negative interest rate environment. 

(11)  ESMA  should  prepare  draft  regulatory  standards  to  revise  the  existing  regulatory 
technical standards in order to take into account the changes made to Regulation (EU) 
No 909/2014 in order to enable the Commission to make any necessary corrections or 
amendments  with  a  view  to  clarifying  the  requirements  set  out  in  such  regulatory 
technical standard, such as the conditions under which participants may execute their 
own buy-ins. 

(12)  Where  a  central  securities  depository  (CSD)  does  not  carry  out  a  settlement  activity 
before  the  beginning  of  the  authorisation  process,  the  criteria  determining  which 
relevant authorities should be involved in such authorisation process should take into 
account  the  anticipated  settlement  activity  to  ensure  that  the  views  of  all  relevant 
authorities potentially interested in the activities of that CSD are taken into account.  

(13)  While  Regulation  (EU)  No  909/2014  requires  national  supervisors  to  cooperate  with 
and  involve  relevant  authorities,  national  supervisors  are  not  required  to  inform  the 
those relevant authorities if and how their views have been considered in the outcome 
of the authorisation process and if additional issues have been identified in the course 
of annual reviews and evaluations. The relevant authorities should therefore be able to 
issue reasoned opinions  on the authorisation of  CSDs and the review and evaluation 
process. The competent authorities should take into account such opinions or explain 
in a reasoned decision why such opinions were not followed. 

(14)  Regular  reviews  and  evaluations  of  CSDs  by  competent  authorities  are  necessary  to 
ensure  that  CSDs  continue  to  have  in  place  appropriate  arrangements,  strategies, 
processes  and  mechanisms  to  evaluate  the  risks  to  which  the  CSD  is,  or  might  be, 
exposed  or  which  may  constitute  a  threat  to  the  smooth  functioning  of  securities 
markets.  Experience  has,  however,  shown  that  an  annual  review  and  evaluation  is 
disproportionately  burdensome  for  both  CSDs  and  competent  authorities  and  with 
limited  added  value.  A  more  appropriately  calibrated  periodicity  should  therefore  be 
set  in  order to  alleviate this  burden and  avoid  a  duplication of information from  one 
review the other. The supervisory capacities of competent authorities and the objective 
of safeguarding financial stability should, however, not be undermined. 

(15)  A CSD should be prepared to face scenarios that may potentially prevent it from being 
able  to  provide  its  critical  operations  and  services  as  a  going  concern  and  assess  the 
effectiveness of a full range of options for recovery or orderly wind-down. Regulation 
(EU) No 909/2014 introduced requirements in this respect, providing in particular that 
a competent authority is to require the CSD to submit an adequate recovery plan and is 
to ensure that an adequate resolution plan is established and maintained for each CSD. 
No harmonised resolution regime on which a resolution plan could be based, however, 
currently  exists.  While  CSDs  authorised  to  offer  banking-type  ancillary  services  fall 
within  the  scope  of  Directive  2014/59/EU  of  the  European  Parliament  and  of  the 

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Council42, no specific provisions exist for CSDs that are not authorised to provide such 
services  and  therefore  are  not  considered  credit  institutions  under  Directive 
2014/59/EU  with  the  obligation  to  have  recovery  and  resolution  plans  in  place. 
Clarifications  should  therefore  be  introduced  with  a  view  to  better  align  the 
requirements  applicable  to  CSDs  taking  into  account  the  absence  of  a  Union 
framework for the recovery and resolution for all CSDs.  

(16)  Where a new CSD applies for authorisation and compliance with certain requirements 
cannot  be  assessed  because  the  CSD  is  not  operational  yet,  the  competent  authority 
should  be  able  to  grant  the  authorisation  subject  to  the  condition  that  those 
requirements are complied with when the CSD effectively launches its activities. 

(17)  The  procedure  set  out  in  Article  23  of  Regulation  (EU)  No  909/2014  regarding  the 
provision by CSDs of notary and central maintenance services in relation to financial 
instruments  constituted  under  the  law  of  a  Member  State  other  than  that  of  their 
authorisation has proven to be burdensome and some of its requirements are unclear. 
This  has  resulted  in  a  disproportionately  costly  and  lengthy  process  for  CSDs.  The 
procedure  should  therefore  be  simplified  to  better  dismantle  the  barriers  to  cross-
border  settlement  in  order  for  authorised  CSDs  to  fully  benefit  from  the  freedom  to 
provide services within the Union. 

(18)  Regulation  (EU)  No  909/2014  requires  the  cooperation  of  authorities  that  have  an 
interest  in  the  operations  of  CSDs  that  offer  services  in  relation  to  financial 
instruments  issued  under  the  law  of  more  than  one  Member  States.  Nonetheless,  the 
supervisory  arrangements  remain  fragmented  and  can  lead  to  differences  in  the 
allocation and nature of supervisory powers depending on the CSD concerned. This in 
turn  creates  barriers  to  the  cross-border  provision  of  CSD  services  in  the  Union, 
perpetuates  the  remaining  inefficiencies  in  the  Union  settlement  market  and  has 
negative impacts on the stability of Union financial markets. Despite the possibility to 
set up colleges in accordance with Article 24(4) of that Regulation (, that option has 
barely  been  used.  In  order  to  ensure  an  effective  and  efficient  coordination  of  the 
supervision  by  competent  authorities,  the  requirement  to  set  up  mandatory  colleges 
should apply in two cases. Firstly, for CSDs that offer notary and central maintenance 
services  in  relation  to  financial  instruments  issued  under  the  law  of  more  than  one 
Member  States  (the  passporting  colleges)  and  secondly  for  CSDs  that  belong  to  the 
same group (the “group-level  colleges”). To reduce the administrative burden on the 
authorities  participating  to  colleges,  where  a  CSD  offering  services  cross-border  is 
also part of a group of CSDs, the chair of the college should be able to decide that only 
one college is established for that CSD. Where the other CSDs in the group also offer 
services  cross-border,  the  chair  of  the  college  should  be  able  to  make  that  decision 
only where the competent authorities of those other CSDs consent. In that case, there 
would be only one college for all CSDs within the group that would exercise the tasks 
assigned  to  passporting  and  group-level  colleges.  Such  colleges  should  ensure  the 
sharing of information pertaining to the CSDs concerned.  

(19)  ESMA  and  competent  authorities  currently  have  limited  information  on  the  services 
that  CSDs  established  in  a  third-country  offer  in  relation  to  financial  instruments 

42 

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 (OJ L 173, 12.6.2014, p. 190). 

EN 

23 

  EN 

                                                 
constituted  under  the  law  of  a  Member  State  for  several  reasons.  First,  due  to  the 
deferred  application,  without  an  end  date,  of  recognition  requirements  for  third-
country  CSDs  that  already  provided  central  maintenance  and  notary  services  in  the 
Union  before  the  date  of  application  of  Regulation  (EU)  No  909/2014  pursuant  to 
Article  69(4)  of  that  Regulation.  Second,  due  to  the  fact  that  where  a  third-country 
CSD provides only the settlement service, it is not subject to recognition requirements. 
Finally,  since  Regulation  (EU)  No  909/2014  does  not  require  CSDs  established  in  a 
third-country  to  notify  Union  authorities  of  their  activities  related  to  financial 
instruments  constituted  under  the  law  of  a  Member  State.  Due  to  that  lack  of 
information, neither issuers nor public authorities at national and Union level would be 
able  to  assess  the  activities  of  those  CSDs  in  the  Union  if  needed.  Therefore,  CSDs 
established in a third-country should be required to inform Union authorities of their 
activities  in  relation  to  financial  instruments  constituted  under  the  law  of  a  Member 
State. 

(20)  Article 27(2) of Regulation (EU) No 909/2014 requires a CSD to have a management 
body of which at least one third, but no less than two, of its members are independent. 
That  concept  of  independence  may,  however,  be  subject  to  divergent  interpretations 
and should therefore be clarified, in line with the definition of ‘independent members’ 
under Article 2(28) of Regulation (EU) No 648/2012. 

(21) 

In  order  to  ensure  the  consistency  of  interpretation  of  the  key  issues  on  which  user 
committees  should  advise  the  management  body,  it  should  be  further  clarified  what 
elements are included in the ‘service level’. 

(22)  Given  their  central  role  regarding  the  safety  of  transactions,  CSDs  should  not  only 
reduce  the  risks  associated  with  the  safekeeping  and  settlement  of  transactions  in 
securities, but should seek to minimise those risks.  

(23)  Under  certain  circumstances,  a  security  may  be  constituted  under  the  national 
corporate or similar laws of two different Member States. This is in particular the case 
for  debt  securities  where  the  issuer  is  established  in  one  Member  State  and  the 
securities may be issued under the governing law of another Member State. In such a 
case, both national corporate or similar laws should continue to apply. 

(24) 

(25) 

In order to ensure that issuers who arrange for their securities to be recorded in a CSD 
established  in  another  Member  State  can  comply  with  the  relevant  provisions  of  the 
corporate  or  similar  law  of  such  Member  States,  Member  States  should  regularly 
update the list of such national key relevant provisions published by ESMA. 

In order to avoid settlement risks due to the insolvency of the settlement agent, a CSD 
should  settle,  whenever  practical  and  available,  the  cash  leg  of  the  securities 
transaction  through  accounts  opened  with  a  central  bank.  Where  that  option  is  not 
practical and available, including where a CSD does not meet the conditions to access 
a central bank other than that of its home Member State, that CSD should be able to 
settle the cash leg of transactions in foreign currencies through accounts opened with 
institutions  authorised  to  provide  banking  services  under  the  conditions  provided  in 
Regulation  (EU)  No  909/2014.  The  efficiency  of  the  settlement  market  would  be 
better served by enhancing the possibilities for CSDs to provide settlement in foreign 
currencies through the use of accounts opened with institutions authorised to provide 
banking services, within appropriate risk limits, with a view to deepen capital markets 
and  enhance  cross-border  settlement.  For  that  purpose,  CSDs  authorised  to  provide 
banking-type ancillary services in accordance with Regulation (EU) No 909/2014 and 
for  which  the  relevant  risks  are  already  monitored,  should  be  able  to  offer  such 

EN 

24 

  EN 

services to other CSDs that do not hold such license irrespective if the latter are part of 
the same group of companies. 

(26)  Within  an  appropriately  set  risk  limit,  CSDs  that  are  not  authorised  to  provide 
banking-type ancillary services should be able to offer a sufficient amount of foreign 
currency  settlement  through  accounts  opened  with  credit  institutions  or  through  its 
own account. The threshold below which a CSD may designate a credit institution to 
provide any banking-type ancillary services from within a separate legal entity without 
being required to comply with the conditions set out in Title IV of Regulation (EU) No 
909/2014 should be calibrated in a way that promotes efficiency of settlement and the 
use  of  banking  ancillary  services  while  ensuring  financial  stability.  As  a  body  with 
specialised  expertise  regarding  banking  and  credit  risk  matters,  EBA  should  be 
entrusted  with  the  development  of  draft  regulatory  technical  standards  to  set  the 
appropriate  thresholds  and,  where  necessary,  any  risk  mitigating  requirements.  EBA 
should  also  closely  cooperate  with  the  members  of  the  ESCB  and  with  ESMA.  The 
Commission  should  be  empowered  to  adopt  regulatory  technical  standards  in 
accordance with Article 290 of the Treaty on the Functioning of the European Union 
(TFEU) with regard to the detailed elements of the determining for the provisioning of 
banking type ancillary services, the accompanying details of the risk management and 
capital requirements for CSDs and the prudential requirements on credit and liquidity 
risks  for  CSDs  and  designated  credit  institutions  that  are  authorised  to  provide 
banking-type ancillary services. 

(27)  CSDs,  including  those  authorised  to  provide  banking-type  ancillary  services,  and 
designated credit institutions should cover relevant risks in their risk management and 
prudential frameworks, including relevant netting arrangements.  Tools to cover those 
risks  should  include  maintaining  sufficient  qualifying  liquid  resources  in  all  relevant 
currencies and ensuring that stress scenarios are sufficiently strong. CSDs should also 
ensure that corresponding liquidity risks are managed and covered by highly reliable 
funding arrangements with  creditworthy institutions, whether those  arrangements are 
committed  or  have  similar  reliability.  The  EBA  should  submit  draft  regulatory 
technical standards to revise the existing regulatory technical standards in order to take 
into  account  those  changes  to  prudential  requirements,  in  order  to  enable  the 
Commission  to  make  any  necessary  amendments  with  a  view  to  clarifying  the 
requirements set out in such regulatory technical standards, such as those related to the 
management of potential liquidity shortfalls.  

(28)  A period of only 1 month for relevant authorities and competent authorities to issue a 
reasoned  opinion  on  the  authorisation  to  provide  banking-type  ancillary  services  has 
proven to be too short for those authorities to be able to make a substantiated analysis. 
Therefore, a longer period of 2 months should be laid down. 

(29) 

In order to provide CSDs established in the Union or in third countries with sufficient 
time  to  apply  for  authorisation  and  recognition  of  their  activities,  the  date  of 
application of the authorisation  and recognition  requirements  of Regulation (EU) No 
909/2014  was  initially  deferred  until  an  authorisation  or  recognition  decision  was 
made pursuant to that Regulation. Sufficient time has elapsed since the entry into force 
of that Regulation. , Therefore, those requirements should now start to apply to ensure, 
on the one hand, a level-playing field amongst all CSDs offering services in relation to 
financial instruments  constituted under the law of a Member State, and, on the other 
hand,  that  authorities  at  national  and  Union  level  have  the  necessary  information  to 
ensure investor protection and monitor financial stability. 

EN 

25 

  EN 

(30)  Regulation  (EU)  No  909/2014  currently  requires  ESMA  to  prepare,  in  cooperation 
with  national  competent  authorities  and  the  EBA,  annual  reports  on  12  topics  and 
submit  those  reports  to  the  Commission.  That  requirement  is  disproportionate 
considering  the  nature  of  certain  topics  which  do  not  require  an  annual  update.  The 
frequency  and  number  of  those  reports  should  therefore  be  recalibrated  in  order  to 
reduce  the  burden  on  ESMA  and  competent  authorities  while  ensuring  that  the 
Commission  is  provided  with  the  necessary  information  it  needs  to  review  the 
implementation of Regulation (EU) No 909/2014. 

(31)  Regulation (EU) No 909/2014 should therefore be amended accordingly. 

(32)  The power to adopt acts in accordance with Article 290 TFEU should be delegated to 
the Commission to specify the effect that, in a context of negative interest rates, fails 
could have on the affected counterparties in relation to the calculation of cash penalties 
or  their  adverse  incentives  to  fail,  the  reasons  causing  settlement  fails  that  are  to  be 
considered  to  be  not  attributable  to  the  participants  to  the  transaction  and  the 
transactions  that  are  not  to  be  considered  to  involve  two  trading  parties,  the 
functioning of colleges of supervisors, the information to be notified by third-country 
CSDs; and the maximum amount below which CSDs may use any credit institution to 
settle the cash payments. 

(33)  To  ensure  uniform  conditions  for  the  implementation  of  this  Regulation,  and  in 
particular  with  regard  to  the  application  and  the  suspension  of  mandatory  buy-in 
requirements  where  those  apply,  implementing  powers  should  be  conferred  on  the 
Commission. Those powers should be exercised in accordance with Regulation (EU) 
No 182/2011 of the European Parliament and of the Council43.  

(34)  Since  the  objectives  of  this  Regulation,  namely  to  increase  the  provision  of  cross-
border  settlement  by  CSDs,  reduce  administrative  burden  and  compliance  costs  and 
ensure that authorities have sufficient information in order to monitor risks, cannot be 
sufficiently achieved by the Member States but can rather, by reason of their scale and 
effects,  be  better  achieved  at  Union  level,  the  Union  may  adopt  measures,  in 
accordance  with  the  principle  of  subsidiarity  as  set  out  in  Article  5  of  the  Treaty  on 
European Union. In accordance with the principle of proportionality, as set out in that 
Article, this Regulation does not go beyond what is necessary in order to achieve those 
objectives. 

(35)  The  application  of  the  revised  scope  of  the  rules  on  cash  penalties,  the  new 
requirements regarding the establishment of colleges of supervisors, the submission of 
a  notification  by  third-country  CSDs  of  the  core  services  they  provide  in  relation  to 
financial  instruments  constituted  under  the  law  of  a  Member  State,  the  revised 
threshold under which credit institutions may offer to settle the cash payments for part 
of  the  CSD’s  securities  settlement  system  and  the  revised  prudential  requirements 
applicable to credit institutions or CSDs authorised to provide banking-type ancillary 
services pursuant to Article 59 of Regulation (EU) No 909/2014 should be deferred to 
give sufficient time for the adoption of the necessary delegated acts further specifying 
such requirements,  

43 

Regulation (EU) No 182/2011 of the European Parliament and of the Council of 16 February 2011 
laying down the rules and general principles concerning mechanisms for control by the Member States 
of the Commission's exercise of implementing powers (OJ L 55, 28.2.2011, p. 13). 

EN 

26 

  EN 

                                                 
HAVE ADOPTED THIS REGULATION: 

Article 1 

Amendments to Regulation (EU) No 909/2014 

Regulation (EU) No 909/2014 is amended as follows: 

(1) in Article 2 the following point (25a) is inserted: 

‘(25a)  ‘group’  means  a  group  within  the  meaning  of  Article  2(11)  of  Directive 
2013/34/EU;’; 

(2) Article 7 is amended as follows: 

(a) 

in paragraph 2, the third subparagraph is replaced by the following:  

‘The  penalty  mechanism  referred  to  in  the  first  subparagraph  shall  include  cash 
penalties  for  participants  that  cause  settlement  fails  (‘failing  participants’)  except 
where those settlement fails are caused by factors not attributable to the participants 
to  the  transaction  or  for  operations  that  do  not  involve  two  trading  parties.  Cash 
penalties shall be calculated on a daily basis for each business day that a transaction 
fails to be settled after its intended settlement date until the end of the buy-in process 
referred to in paragraphs 3 to 8 that is to be applied pursuant to paragraph 2a, or the 
actual  settlement  day,  whichever  is  the  earlier.  The  cash  penalties  shall  not  be 
configured as a revenue source for the CSD.’; 

(b) 

the following paragraph 2a is inserted: 

‘2a.  Without  prejudice  to  the  penalty  mechanism  referred  to  in  paragraph  2  of  this 
Article  and  the  right  to  bilaterally  cancel  the  transaction,  the  Commission  may,  by 
means of an implementing act, decide to which of the financial instruments referred 
to  in  Article  5(1)  or  categories  of  transactions  in  those  financial  instruments  the 
settlement discipline measures referred to in paragraphs 3 to 8  of this Article are to 
be  applied  where  the  Commission  considers  that  those  measures  constitute  a 
proportionate  means  to  address  the  level  of  settlement  fails  in  the  Union  and  that, 
based on the number and volume of settlement fails, any of the following conditions 
is met:  

(a) the application of the cash penalty mechanism referred to in paragraph 2 has not 
resulted in a long-term, continuous reduction of settlement fails in the Union;  

(b) settlement efficiency in the Union has not reached appropriate levels considering 
the situation in third-country capital markets that are comparable in terms of size, 
liquidity as well as instruments traded and types of transactions executed on such 
markets;  

(c) the level of settlement fails in the Union has or is likely to have a negative effect 
on the financial stability of the Union. 

The implementing act shall be adopted in accordance with the examination procedure 
referred to in Article 68(2).’; 

(c) 

paragraph 3 is replaced by the following: 

‘3.  Where the Commission  has adopted an implementing act  pursuant  to  paragraph 
2a and where a failing participant has not delivered financial instruments covered by 

EN 

27 

  EN 

that implementing act to the receiving participant within a period after the intended 
settlement date (‘extension period’) equal to 4 business days, a buy-in process shall 
be initiated whereby those instruments shall be available for settlement and delivered 
to the receiving participant within an appropriate timeframe.  

Where  the  transaction  relates  to  a  financial  instrument  traded  on  an  SME  growth 
market,  the  extension  period  shall  be  15  calendar  days  unless  the  SME  growth 
market decides to apply a shorter period.’ 

(d) 

the following paragraph 3a is inserted: 

‘3a. Where a receiving participant (the ‘intermediate receiving participant’) does not 
receive the financial instruments by the date referred to in paragraph 3 leading to a 
failing  onward  delivery  of  those  financial  instruments  to  another  receiving 
participant  (the  ‘end  receiving  participant’),  the  intermediate  receiving  participant 
shall be considered as complying with the obligation to execute a buy-in against the 
failing participant where the end receiving participant executes the buy-in for those 
financial  instruments.  Similarly,  the  intermediate  receiving  participant  may  pass-on 
to the failing participant its obligations toward the end receiving participant pursuant 
to paragraphs 6, 7 and 8.’;  

(e) 

paragraph 4 is replaced by the following: 

‘4.  Without  prejudice  to  paragraph  3a,  the  following  derogations  from  the 
requirement referred to in paragraph 3 shall apply: 

(a)  based  on  asset  type  and  liquidity  of  the  financial  instruments  concerned,  the 
extension  period  may  be  increased  from  4  business  days  up  to  a  maximum  of  7 
business days where a shorter extension period would affect the smooth and orderly 
functioning of the financial markets concerned; 

(b) for operations composed of several transactions including securities repurchase or 
lending  agreements,  the  buy-in  process  referred  to  in  paragraph  3  shall  not  apply 
where the timeframe of those operations is sufficiently short and renders the buy-in 
process ineffective; 

(c)  for settlement  fails  that  occurred for reasons  not  attributable to the participants, 
the buy-in process referred to in paragraph 3 shall not apply;  

(d) for transactions that do not involve two trading parties the buy-in process referred 
to in paragraph 3 shall not apply.’; 

(f) 

paragraph 6 is replaced by the following: 

‘6. Without prejudice to the penalty mechanism referred to in paragraph 2, where the 
price of the financial instruments agreed at the time of the trade is different from the 
price paid for the execution of the buy-in, the corresponding difference shall be paid 
by  the  participant  benefitting  from  such  price  difference  to  the  other  participant  no 
later  than  on  the  second  business  day  after  the  financial  instruments  have  been 
delivered following the buy-in.’; 

(g)  paragraph 11 is replaced by the following: 

‘11. Paragraphs 2 to 9 shall not apply to failing participants which are CCPs, except 
for  transactions  entered  into  by  a  CCP  where  it  does  not  interpose  itself  between 
counterparties. 

EN 

28 

  EN 

If  a  CCP incurs losses from the application of  Article 7(2), third  subparagraph, the 
CCP may establish in its rules a mechanism to cover such losses.’;  

(h) 

the following paragraph 13a is inserted: 

‘13a. ESMA may recommend that the Commission suspend in a proportionate way 
the  buy-in  mechanism  referred  to  in  paragraphs  3  to  8  for  specific  categories  of 
financial instruments where necessary to avoid or address a serious threat to financial 
stability  or  to  the  orderly  functioning  of  financial  markets  in  the  Union.  Such 
recommendation  shall  be  accompanied  by  a  fully  reasoned  assessment  of  its 
necessity and shall not be made public.  

Before making the recommendation, ESMA shall consult the ESRB and the ESCB.  

The Commission shall, without undue delay after receipt of the recommendation, on 
the basis of the reasons and evidence provided by ESMA, either suspend the buy-in 
mechanism  referred  to  in  paragraph  3  for  the  specific  categories  of  financial 
instruments  by  means  of  an  implementing  act,  or  reject  the  recommended 
suspension. Where the Commission rejects the requested suspension, it shall provide 
the reasons thereof in writing to ESMA. Such information shall not be made public.  

The implementing act shall be adopted in accordance with the procedure referred to 
in Article 68(3).  

The suspension of the buy-in mechanism shall be communicated to ESMA and shall 
be published in the Official Journal of the European Union and on the Commission's 
website.  

The  suspension  of  the  buy-in  mechanism  shall  be  valid  for  an  initial  period  of  no 
more than 6 months from the date of application of that suspension. 

Where  the  grounds  for  the  suspension  continue  to  apply,  the  Commission  may,  by 
way  of  an  implementing  act,  extend  the  suspension  referred  to  in  the  third 
subparagraph for additional periods of no more than 3 months, with the total period 
of the suspension not exceeding 12 months. Any extensions of the suspension shall 
be published in accordance with the fifth subparagraph.  

The implementing act shall be adopted in accordance with the procedure referred to 
in  Article  68(3).  ESMA  shall,  in  sufficient  time  before  the  end  of  the  suspension 
period referred to in the sixth subparagraph or of the extension period referred to in 
the  seventh  subparagraph,  issue  an  opinion  to  the  Commission  on  whether  the 
grounds for the suspension continue to apply.’; 

(i) 

paragraph 14 is replaced by the following: 

‘14. The Commission shall be empowered to supplement this Regulation by adopting 
delegated  acts  in  accordance  with  Article  67  specifying  parameters  for  the 
calculation of a deterrent and proportionate level of the cash penalties referred to in 
paragraph 2, third subparagraph, of this Article based on asset type, liquidity of the 
financial instrument,  type of transaction and the  effect  that low or negative interest 
rates  could  have  on  the  incentives  of  counterparties  and  fails.  The  parameters  used 
for  the  calculation  of  cash  penalties  shall  ensure  a  high  degree  of  settlement 
discipline  and  the  smooth  and  orderly  functioning  of  the  financial  markets 
concerned.’; 

(j) 

the following paragraph 14a is inserted: 

EN 

29 

  EN 

‘14a.  The  Commission  may  adopt  delegated  acts  in  accordance  with  Article  67  to 
supplement this Regulation specifying the reasons for settlement fails that are to be 
considered  as  not  attributable  to  the  participants  to  the  transaction  and  the 
transactions  that  are  not  to  be  considered  to  involve  two  trading  parties  under 
paragraph 2 and paragraph 4, points (c) and (d), of this Article.’; 

(k) 

in paragraph 15, the second subparagraph is replaced by the following:  

‘ESMA shall submit those draft regulatory technical standards to the Commission by 
… [PO please insert the date = 1 year after the entry into force of this Regulation].’;  

(3) in Article 12(1), points (b) and (c) are replaced by the following: 

‘(b)  the  central  banks  in  the  Union  issuing  the  most  relevant  currencies  in  which 
settlement takes or will take place; 

(c)  where  relevant,  the  central  bank  in  the  Union  in  whose  books  the  cash  leg  of  a 
securities settlement system operated by the CSD is or will be settled.’; 

(4) Article 17 is amended as follows: 

(a) 

in paragraph 2, the following subparagraph is added: 

’By way of derogation from the first subparagraph, where an applicant CSD does not 
comply  with  all  requirements  of  this  Regulation,  but  where  it  may  be  reasonably 
assumed  that  it  will  do  so  when  it  will  have  actually  launched  its  activities,  the 
competent  authority  may  grant  the  authorisation  subject  to  the  condition  that  that 
CSD has all the necessary arrangements in place to comply with the requirements of 
this Regulation when it actually launches its activities.”; 

(b)  paragraph 4 is replaced by the following: 

‘4.  From  the  moment  when  the  application  is  considered  to  be  complete,  the 
competent authority shall transmit all information included in the application to the 
relevant  authorities  and  consult  those  authorities  concerning  the  features  of  the 
securities settlement system operated by the applicant CSD.  

Each  relevant  authority  may  issue  a  reasoned  opinion  to  the  competent  authority 
within 3 months of the receipt of the information by the relevant authority. Where a 
relevant  authority  does  not  provide  an  opinion  within  that  timeframe  it  shall  be 
deemed to have issued a positive opinion. 

Where at least one of the relevant authorities issues a negative reasoned opinion, the 
competent authority wishing to grant the authorisation shall within 30 calendar days 
provide  the  relevant  authorities  with  a  reasoned  decision  addressing  the  negative 
opinion. 

Where within 30 calendar days after the competent authority has issued the reasoned 
decision referred to in the third subparagraph, any of the relevant  authorities  issues 
another negative opinion and the competent authority disagrees it shall inform those 
relevant authorities. Any of the authorities that issued a negative opinion may refer 
the matter to ESMA for assistance under Article 31(2) point (c), of Regulation (EU) 
No 1095/2010. 

Where 30 calendar days after referral to ESMA the issue is not settled, the competent 
authority wishing to grant the authorisation shall take the final decision and provide a 
detailed explanation of its decision in writing to the relevant authorities. 

EN 

30 

  EN 

Where the competent authority wishes to refuse authorisation, the matter shall not be 
referred to ESMA. 

Negative  opinions  shall  state  in  writing  the  full  and  detailed  reasons  why  the 
requirements laid down in this Regulation or other requirements of Union law are not 
met.’; 

(c) 

the following paragraph 7a is inserted:  

‘7a.  The  competent  authority  shall  inform  without  undue  delay  the  authorities 
consulted pursuant to paragraphs 4 to 7 of the results, including any remedial actions, 
of the authorisation process.’;  

(5) in Article 20, paragraph 5 is replaced by the following: 

‘5. A CSD shall establish, implement and maintain adequate procedures ensuring the 
timely and orderly settlement and transfer of the assets of clients and participants to 
another CSD in the event of a withdrawal of authorisation referred to in paragraph 1. 
Such procedures shall include the transfer of issuance accounts and records linked to 
the provision of core services referred to in Section A, points 1 and 2, of the Annex.’; 

(6) Article 22 is amended as follows: 

(a) 

paragraphs 1 to 4 are replaced by the following: 

‘1.  The  competent  authority  shall,  at  least  every  2  years,  review  the  arrangements, 
strategies,  processes  and  mechanisms  implemented  by  a  CSD  with  respect  to 
compliance with this Regulation and evaluate the risks to which the CSD is, or might 
be, exposed to or which it creates for the smooth functioning of securities markets or 
stability of the financial markets. 

2. The CSD shall identify scenarios that may potentially prevent it from being able to 
provide  its  critical  operations  and  services  as  a  going  concern  and  assess  the 
effectiveness  of  a  full  range  of  options  for  recovery  or  orderly  wind-down.  Those 
scenarios shall take into account the various independent and related risks to which 
the  CSD  is  exposed.  Using  that  analysis,  the  CSD  shall  prepare  and  submit  to  the 
competent authority appropriate plans for its recovery or orderly wind-down. 

3. The plans referred to in paragraph 2 shall contain at least the following:  

(a) a substantive summary of the key recovery or orderly wind-down strategies; 

(b) an identification of the CSD’s critical operations and services; 

(c)  adequate  procedures  ensuring  the  timely  and  orderly  settlement  and  transfer  of 
the  assets  of  clients  and  participants  to  another  CSD  in  the  event  it  became 
permanently impossible for the CSD to restore its critical operations and services; 

(d) a description of the measures needed to implement the key strategies.  

The  CSD  shall  have  the  capacity  to  identify  and  provide  to  related  entities  the 
information needed to implement the plans on a timely basis during stress scenarios.  

The CSD shall review and update the plans regularly and a least every 2 years. The 
plans shall have regard to the size, systemic importance, nature, scale and complexity 
of the activities of the CSD concerned and any relevant recovery or resolution plan 
established in accordance with Directive 2014/59/EU. 

Where  a  resolution  plan  is  established  and  maintained  for  a  CSD  with  the  aim  of 
ensuring its core functions, the competent authority shall inform ESMA thereof. 

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4. The competent authority shall establish the frequency and depth of the review and 
evaluation referred to in paragraph 1 having regard to the size, systemic importance, 
nature, scale and complexity of the activities of the CSD concerned. The review and 
evaluation shall be updated at least every 2 years.’; 

(b)  paragraphs 6 and 7 are replaced by the following: 

‘6.  When  performing  the  review  and  evaluation  referred  to  in  paragraph  1,  the 
competent  authority  shall,  at  an  early  stage,  transmit  necessary  information  to  the 
relevant  authorities and,  where applicable, the authority  referred to  in  Article 67 of 
Directive 2014/65/EU, and consult them in particular concerning the functioning of 
the securities settlement systems operated by the CSD. 

The  consulted  authorities  may  issue  a  reasoned  opinion  within  3  months  of  the 
receipt of the information by the competent authority. 

Where  an  authority  does  not  provide  an  opinion  within  that  deadline  it  shall  be 
deemed to have issued a positive opinion. 

Where at least one of the relevant authorities issues a negative reasoned opinion, the 
competent  authority  shall  within  30  calendar  days  provide  the  relevant  authorities 
with a reasoned decision addressing the negative opinion. 

Where  within  30 calendar days after the reasoned decision referred to  in  the fourth 
subparagraph  of  this  paragraph  is  issued,  any  of  the  relevant  authorities  issues 
another  negative  opinion  and  the  competent  authority  disagrees,  the  competent 
authority  shall  inform  that  relevant  authority.  Any  of  the  authorities  that  issued  a 
negative opinion may  refer the matter to  ESMA  for assistance under  Article 31(2), 
point (c), of Regulation (EU) No 1095/2010. 

Where 30 calendar days after referral to ESMA the issue is not settled, the competent 
authority  shall  take  the  final  decision  on  the  review  and  evaluation  and  provide  a 
detailed explanation of its decision in writing to the relevant authorities. 

Negative  opinions  shall  state  in  writing  the  full  and  detailed  reasons  why  the 
requirements laid down in this Regulation or other requirements of Union law are not 
met. 

7. The competent authority shall regularly, and at least once every 2 years, inform the 
relevant authorities and, where applicable, the colleges referred to in Article 24a  of 
this Regulation and the authority referred to in Article 67 of Directive 2014/65/EU of 
the results, including any remedial actions or penalties, of the review and evaluation 
referred to in paragraph 1 of this Article.’; 

(c) 

in paragraph 11, the second subparagraph of is replaced by the following: 

‘ESMA shall submit those draft implementing technical standards to the Commission 
by [PO please insert 1 year after the entry into force of this Regulation].’; 

(7) in Article 23, paragraphs 2 to 7 are replaced by the following: 

‘2. An authorised CSD or a CSD that has applied for authorisation pursuant to Article 
17 that intends to provide the core services referred to in Section A, points 1 and 2, of 
the Annex in relation to financial instruments constituted under the laws of another 
Member State referred to in Article 49(1), second subparagraph, or to set up a branch 
in another Member State shall be subject to the procedure referred to in paragraphs 3 
to  7  of  this  Article.  The  CSD  may  provide  such  services  only  after  it  has  been 

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authorised pursuant to Article 17 but not earlier than the relevant date applicable in 
accordance with paragraph 6. 

3. Any CSD wishing to provide the services referred to in paragraph 2 of this Article 
in  relation  to  financial  instruments  constituted  under  the  law  of  another  Member 
State  referred  to  in  Article  49(1),  second  subparagraph,  for  the  first  time,  or  to 
change  the  range  of  those  services  provided  shall  submit  documents  with  the 
following information to the competent authority of the home Member State: 

(a) the host Member State; 

(b)  a  programme  of  operations  stating  in  particular  the  services  which  the  CSD 
intends to provide; 

(c) the currency or currencies that the CSD intends to process; 

(d) where there is a branch, the organisational structure of the branch and the names 
of those responsible for the management of the branch; 

(e)  an  assessment  of  the  measures  the  CSD  intends  to  take  to  allow  its  users  to 
comply with the national law referred to in Article 49(1). 

4. Within 1 month from the receipt of the information referred to in paragraph 3, the 
competent authority of the home Member State shall communicate that information 
to the competent authority of the host Member State unless, by taking into account 
the  provision  of  services  envisaged,  it  has  reasons  to  doubt  the  adequacy  of  the 
administrative structure or the financial situation of the CSD wishing to  provide its 
services in the host Member State. Where the CSD already provides services to other 
host  Member  States,  the  competent  authority  of  the  home  Member  State  shall  also 
inform the passporting college referred to in Article 24a. 

The  competent  authority  of  the  host  Member  State  shall  without  delay  inform  the 
relevant  authorities of that Member State of any  communication received under the 
first subparagraph. 

5. Where the competent authority of the home Member State decides in accordance 
with paragraph 4 not to communicate all the information referred to in paragraph 3 to 
the competent authority of the host Member State, it shall give reasons for its refusal 
to  the CSD concerned within  3 months  of receiving all the information  and inform 
the  competent  authority  of  the  host  Member  State  and  the  passporting  college 
referred to in Article 24a of its decision. 

6. The  CSD  may  start  providing  the  services  referred  to  in  paragraph  2  in  the  host 
Member State at the earliest of the following dates: 

(a) after 1 month from the date of transmission of the communication referred to in 
paragraph 4; 

(b) on receipt of a communication from the competent authority of the host Member 
State approving the provision of services in the host Member State.  

The  competent  authority  of  the  home  Member  State  shall  immediately  inform  the 
CSD of the date of transmission of the communication referred to in paragraph 4. 

7. In the event of a change of the information set out in the documents submitted in 
accordance with paragraph 3 of this Article, a CSD shall give written notice of that 
change to the competent authority of the home Member State at least 1 month before 
implementing the change. The competent authority of the host Member State and the 

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passporting  college referred to  in  Article 24a shall also  be informed of that  change 
without delay by the competent authority of the home Member State.’; 

(8) Article 24 is amended as follows: 

(a) 

in paragraph 1, the following subparagraphs are added: 

‘Upon  the  request  of  any  member  of  the  passporting  college  referred  to  in  Article 
24a,  the  competent  authority  of  the  home  Member  State  may  invite  staff  from 
competent authorities of the host Member States and ESMA to participate in on-site 
inspections. 

The  competent  authority  of  the  home  Member  State  may  transmit  to  ESMA  any 
information received from the CSDs during or in relation to on-site inspections.’; 

(b)  paragraph 4 is deleted; 

(c) 

paragraph 5 is replaced by the following: 

‘5. Where  the  competent  authority  of  the  host  Member  State  has  clear  and 
demonstrable grounds for believing that a CSD providing services within its territory 
in  accordance  with  Article  23  is  in  breach  of  the  obligations  arising  from  the 
provisions  of  this  Regulation,  it  shall  inform  the  competent  authority  of  the  home 
Member State, ESMA and the passporting college referred to in Article 24a of those 
findings. 

Where,  despite  measures  taken  by  the  competent  authority  of  the  home  Member 
State, the CSD persists in acting in infringement of the obligations arising from the 
provisions  of  this  Regulation,  the  competent  authority  of  the  host  Member  State 
shall, after informing the competent authority of the home Member State, take all the 
appropriate  measures  needed  in  order  to  ensure  compliance  with  the  provisions  of 
this  Regulation  within  the  territory  of  the  host  Member  State.  ESMA  and  the 
passporting  college  referred  to  in  Article  24a  shall  be  informed  of  such  measures 
without delay. 

The  competent  authority  of  the  host  Member  State  and  of  the  home  Member  State 
may  refer  the  matter  to  ESMA,  which  may  act  in  accordance  with  the  powers 
conferred on it under Article 19 of Regulation (EU) No 1095/2010.’; 

(d)  paragraphs 7 and 8 are deleted; 

(9) in Title III, the following Section 4a is inserted: 

‘Section 4a 

Cooperation of authorities through colleges 

Article 24a 

Colleges of Supervisors for CSDs providing services in another Member State 
and for CSDs that are part of a group with two or more CSDs 

1.  Colleges  of  supervisors  shall  be  established  to  carry  out  the  tasks  referred  to  in 

paragraph 6 in the following cases: 

(a)  where  a  CSD  is  subject  to  the  procedure  referred  to  in  Article  23(3)  to  (7) 
(‘passporting college’); 

(b) where a CSD is part of a group that comprises two or more CSDs authorised in at 
least two Member States (‘group-level college’).  

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In the case referred to in the first subparagraph, point (a), the CSD’s home competent 
authority shall establish, manage and chair the passporting college. That college shall 
be established within 1 month from the date referred to in Article 23(6). Where the 
CSD  submits  subsequent  notifications  pursuant  to  Article  23(3),  the  competent 
authority  of  the  home  Member  State  shall  invite  the  competent  authorities  of  the 
relevant host Member States to the passporting college within 1 month from the date 
referred to in Article 23(6). 

In  the  case  referred  to  in  the  first  subparagraph,  point  (b),  where  the  parent 
undertaking is a CSD authorised in the Union, the competent authority of the home 
Member State of that CSD shall establish, manage and chair the group-level college. 
Where the parent undertaking is not a CSD  authorised in the Union, the competent 
authority of the home Member State of the CSD with the largest balance sheet total 
shall establish, manage and chair the group-level college.  

By  way  of  derogation  from  the  third  subparagraph,  where  the  application  of  the 
criteria  referred  to  in  that  subparagraph  would  be  inappropriate,  the  competent 
authorities  may  waive  by  common  agreement  those  criteria  and  appoint  a  different 
CSD’s competent authority to manage and chair the college, taking into account the 
CSDs  concerned  and  the  relative  importance  of  their  activities  in  the  relevant 
Member States. In such cases, the parent CSD or the CSD with the largest balance 
sheet  total,  as  applicable,  shall  have  the  right  to  be  heard  before  the  competent 
authorities take the decision. 

The competent authorities shall notify the Commission and ESMA without delay of 
any agreement made pursuant to the fourth subparagraph. 

2. The college referred to in paragraph 1 shall consist of: 

(a) ESMA; 

(b) the competent authority of the CSD’s home Member State; 

(c) the relevant authorities referred to in Article 12;  

(d) in the case of a passporting college, the competent authority of the host Member 
States; 

(e)  in  the  case  of  a  group-level  college,  the  competent  authority  and  the  relevant 
authorities of each CSD in the group; 

(f) EBA, where a CSD has been authorised pursuant to Article 54(3). 

3.  Where  a  CSD  subject  to  the  procedure  referred  to  in  Article  23(3)  to  (7)  is  also 
part of a group that comprises two or more CSDs and its competent authority is 
the chair of the group-level college, that competent authority may decide that 
only one college shall be established for the purposes of paragraph 1, points (a) 
and (b), of this Article for that CSD. Where any of the other CSDs within the 
group are also subject to the procedure referred to in  Article 23(3) to  (7), the 
chair  of  the  college  may  make  that  decision  only  with  the  agreement  of  the 
competent authorities of those CSDs.  

Where a college established pursuant to the first subparagraph: 

(a) 

convenes for the exercise of the tasks referred to in paragraph 6, points (a) to (d), of 
this Article , the authorities referred to in paragraph 2, points (a) to (f) of this Article 
in  relation  to  each  CSD  within  the  group  shall  participate  to  that  meeting  of  the 
college;  

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(b) 

convenes  for  the  exercise  of  the  tasks  referred  to  in  paragraph  6,  point  (e),  of  this 
Article  only  the  authorities  referred  to,  in  paragraph  2,  points  (a),  (b),  (c),  (e)  and, 
where applicable, (f) of this Article shall participate to that meeting of the college. 

(a) 

(b) 

(c) 

(d) 

(e) 

4. The chair shall notify the composition of the college to ESMA within 30 calendar 
days of the college's establishment and any change in its composition within 30 
calendar days of that change. ESMA shall publish on its website without undue 
delay the list of the members of that college and keep that list up-to-date. 

5. The competent authority of a Member State which is not a member of the college 
may request from the college any information relevant for the performance of 
its supervisory duties. 

6. The college shall, without prejudice to the responsibilities of competent authorities 

under this Regulation, ensure: 

the exchange of information, including requests for information pursuant to Articles 
13,  14  and  15  and  information  on  the  review  and  evaluation  process  pursuant  to 
Article 22; 

more efficient supervision by  avoiding unnecessary duplicative supervisory  actions, 
such as information requests ; 

agreement on the voluntary entrustment of tasks among its members. 

in the case of a passporting college, the cooperation of the home and host Member 
State pursuant to Article 24 and regarding the measures referred to in Article 23(4), 
point (e) and on any issues encountered in the provision of services in other Member 
States; 

in the case of a group-level college, the exchange of information on resources shared 
and  outsourcing  arrangements  in  place  within  a  group  of  CSDs  pursuant  to  Article 
19,  on  significant  changes  to  the  structure  and  ownership  of  the  group,  and  on 
changes  in  the  organisation,  senior  management,  processes  or  arrangements  where 
those changes have  a significant  impact  on  governance or  risk management for the 
CSDs belonging to the group.  

The chair shall convene a meeting of the college at least once a year.  

In order to facilitate the performance of the tasks assigned to colleges pursuant to the 
first subparagraph of this paragraph, members of the college referred to in paragraph 
2 may add points to the agenda of a meeting. 

7.  The  establishment  and  functioning  of  the  college  shall  be  based  on  a  written 

agreement between all its members. 

That agreement shall determine the practical arrangements for the functioning of the 
college,  including  the  modalities  of  communication  amongst  college  members,  and 
may  determine  tasks  to  be  entrusted  to  the  CSD’s  competent  authority  or  another 
member of the college. 

8. ESMA shall develop draft regulatory technical standards specifying the details of 

the practical arrangements referred to in paragraph 7. 

ESMA shall submit those draft regulatory technical standards to the Commission by 
…  [PO  please  insert  the  date  =  1  year  after  the  date  of  entry  into  force  of  this 
Regulation]. 

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Power is delegated to the Commission to supplement this Regulation by adopting the 
regulatory technical standards referred to in the first subparagraph in accordance with 
Articles 10 to 14 of Regulation (EU) No 1095/2010.’; 

(10) Article 25 is amended as follows: 

(a) 

the following paragraph 2a is inserted:  

“2a. A third-country CSD that intends to provide the core service referred to in point 
(3) of Section A of the Annex in relation to financial instruments constituted under 
the  law  of  a  Member  State  referred  to  in  Article  49(1),  second  subparagraph,  shall 
submit a notification to ESMA.”;  

(b) 

in paragraph 6, the fifth subparagraph is replaced by the following:  

‘Within  6  months  from  the  submission  of  a  complete  application  or  from  the 
adoption  of  an  equivalence  decision  by  the  Commission  in  accordance  with 
paragraph  9,  whichever  is  later,  ESMA  shall  inform  the  applicant  CSD  in  writing 
with a fully reasoned decision whether the recognition has been granted or refused.’; 

(c) 

the following paragraph 13 is added:  

‘13.  ESMA  shall  develop  draft  regulatory  technical  standards  to  specify  the 
information  that  the  third-country  CSD  is  to  provide  to  ESMA  in  the  notification 
referred  to  in  paragraph  2a.  Such  information  shall  be  limited  to  what  is  strictly 
necessary, including, where applicable and available:  

(a) 

(b) 

(c) 

the number of Union participants to whom the third-country CSD provides the 
services referred to in paragraph 2a;  

the  number  and  volume  of  transactions  in  financial  instruments  constituted 
under the law of a Member State settled during the previous year; 

the number and volume of transactions settled by Union participants during the 
previous year.  

ESMA shall submit those draft regulatory technical standards to the Commission by 
…  [PO  please  insert  the  date  =  1  year  after  the  date  of  entry  into  force  of  this 
Regulation].  

Power is delegated to the Commission to supplement this Regulation by adopting the 
regulatory technical standards referred to in the first subparagraph in accordance with 
Articles 10 to 14 of Regulation (EU) No 1095/2010.’; 

(11) in Article 27, the following paragraph 3a is inserted:  

“3a.  For  the  purposes  of  paragraphs  2  and  3,  independent  member  of  the 
management  body  shall  mean  a  member  of  the  management  body  who  has  no 
business, family or other relationship that raises a conflict of interests regarding the 
CSD  concerned  or  its  controlling  shareholders,  its  management  or  its  participants, 
and  who  has  had  no  such  relationship  during  the  five  years  preceding  his 
membership of the management body;” 

(12) in Article 28, paragraph 3 is replaced by the following: 

‘3.  User  committees  shall  advise  the  management  body  on  key  arrangements  that 
impact on their members, including the criteria for accepting issuers or participants 
in their respective securities settlement systems and on service level, which includes 
the choice of a clearing and settlement arrangement, operating structure of the CSD, 

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scope of products settled or recorded, and the use of technology and procedures for 
the operations of the CSD .’; 

(13) Article 36 is replaced by the following:  

“Article 36 

General provisions 

For each securities settlement system it operates a CSD shall have appropriate rules 
and  procedures,  including  robust  accounting  practices  and  controls,  to  help  ensure 
the integrity of securities issues, and minimise and manage the risks associated with 
the safekeeping and settlement of transactions in securities.”; 

(14) in Article 40, paragraph 2 is replaced by the following: 

‘2.  Where  it  is  not  practical  and  available  to  settle  in  central  bank  accounts  as 
provided in paragraph 1, a CSD may offer to settle the cash payments for all or part 
of its securities settlement systems through accounts opened with a credit institution, 
through  a  CSD  that  is  authorised  to  provide  the  services  listed  in  Section  C  of  the 
Annex  whether  within the same  group of undertakings ultimately  controlled by  the 
same parent undertaking or not, or through its own accounts. If a CSD offers to settle 
in accounts opened with a credit institution, through its own accounts or the accounts 
of another CSD, it shall do so in accordance with the provisions of Title IV.’; 

(15) in Article 49(1), the second and the third subparagraphs are replaced by the following:  

‘Without  prejudice  to  the  issuer’s  right  referred  to  in  the  first  subparagraph,  the 
corporate  or  similar  law  of  the  Member  State  under  which  the  securities  are 
constituted shall continue to apply. The corporate or similar law of the Member State 
under which the securities are constituted includes: 

(a) 

(b) 

the  corporate  or  similar  law  of  the  Member  State  where  the  issuer  is 
established; and 

the  governing  corporate  or  similar  law  under  which  the  securities  are 
issued. 

Member States shall compile a list of key relevant provisions of their law, as referred 
to in the second subparagraph. Competent authorities shall communicate that list to 
ESMA  by  18  December  2014.  ESMA  shall  publish  the  list  by  18  January  2015. 
Member States shall update that list regularly and at least every 2  years. They shall 
communicate  the  updated  list  at  those  regular  intervals  to  ESMA.  ESMA  shall 
publish the updated list.’;  

(16) in Article 52, paragraph 1 is replaced by the following: 

‘1. When a CSD submits a request for access to another CSD pursuant to Articles 50 
and  51,  the  receiving  CSD  shall  treat  such  request  promptly  and  shall  provide  a 
response to the requesting CSD within 3 months. If the receiving CSD agrees to the 
request, the link shall be implemented within a reasonable timeframe, but no longer 
than 12 months.’; 

(17) Article 54 is amended as follows: 

(a) 

in paragraph 2, point (b) is replaced by the following: 

‘(b)  to  designate  for  that  purpose  one  or  more  credit  institutions  authorised  in 
accordance with Article 8 of Directive 2013/36/EU or a CSD authorised to provide 
banking-type ancillary services pursuant to paragraph 3 of this Article’. 

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(b) 

in paragraph 4, the first subparagraph is amended as follows: 

(i) the introductory wording is replaced by the following: 

“Where a CSD seeks to designate a credit institution or use a CSD that is authorised 
pursuant to paragraph 3 to provide any banking-type ancillary services from within a 
separate  legal  entity,  which  may  be  part  of  the  group  to  which  the  former  CSD 
belongs,  whether  or  not  ultimately  controlled  by  the  same  parent  undertaking,  the 
authorisation  referred  to  in  paragraph  2  shall  be  granted  only  where  the  following 
conditions are met:”; 

(ii) point (c) is deleted; 

(c) 

paragraph 5 is replaced by the following: 

‘5. Paragraph 4 shall not apply to credit institutions referred to in paragraph 2, point 
(b), that offer to settle the cash payments for part of the CSD’s securities settlement 
system, if the total value of such cash settlement through accounts opened with those 
credit  institutions  does  not  exceed  a  maximum  amount  calculated  over  a  one-year 
period. That threshold shall be determined in accordance with paragraph 9. 

The  competent  authority  shall  monitor  at  least  once  per  year  that  the  threshold 
referred  to  in  the  first  subparagraph  is  respected  and  report  its  findings  to  ESMA, 
ESCB  and  EBA.  Where  the  competent  authority  determines  that  the  threshold  has 
been  exceeded,  it  shall  require  the  CSD  concerned  to  seek  authorisation  in 
accordance  with  paragraph  4.  The  CSD  concerned  shall  submit  its  application  for 
authorisation within 6 months.’; 

(d) 

the following paragraph 9 is added:  

‘9.  EBA  shall,  in  close  cooperation  with  ESMA  and  the  members  of  the  ESCB, 
develop  draft  regulatory  technical  standards  to  determine  the  maximum  amount 
referred  to  in  paragraph  5,  taking  into  account  the  need  to  balance  the  credit  and 
liquidity  risks  for  CSDs  that  result  from  the  settlement  of  cash  payments  through 
accounts  opened  with  credit  institutions  and  the  need  to  allow  CSDs  to  settle  in 
foreign  currencies  through  accounts  opened  with  such  credit  institutions.  When 
developing these draft regulatory technical standards the EBA shall also determine, 
where  necessary,  any  accompanying  appropriate  risk  management  and  prudential 
mitigating requirements. 

EBA  shall  submit  those  draft  regulatory  technical  standards  to  the  Commission  by 
[PO  please  insert  the  date=  1  year  after  the  date  of  entry  into  force  of  this 
Regulation]. 

Power is delegated to the Commission to supplement this Regulation by adopting the 
regulatory technical standards referred to in the first subparagraph in accordance with 
Articles 10 to 14 of Regulation (EU) No 1095/2010.’; 

(18) in Article 55(5), the first subparagraph is replaced by the following: 

‘The authorities referred to in paragraph 4, points (a) to (e), shall issue a reasoned opinion 
on  the  authorisation  within  2  months  of  receipt  of  the  information  referred  to  in  that 
paragraph. Where an authority does not provide an opinion within that deadline it shall be 
deemed to have a positive opinion.’; 

(19) Article 59 is amended as follows: 

(a) paragraph 4 is amended as follows: 

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(i) points (c), (d) and (e) are replaced by the following: 

‘(c) it shall maintain sufficient qualifying liquid  resources in all relevant  currencies 
for  a  timely  provision  of  settlement  services  under  a  wide  range  of  potential  stress 
scenarios  including  the  liquidity  risk  generated  by  the  default  of  at  least  two 
participants,  including  its  parent  undertakings  and  subsidiaries,  to  which  it  has  the 
largest exposures; 

(d) it shall mitigate the corresponding liquidity risks with qualifying liquid resources 
in  each  relevant  currency  such  as  cash  at  the  central  bank  of  issue  and  at  other 
creditworthy financial institutions, committed lines of credit or similar arrangements 
and highly liquid collateral or investments that are readily available and convertible 
into  cash  with  prearranged  and  highly  reliable  funding  arrangements,  even  in 
extreme but plausible market conditions and it shall identify, measure and monitor its 
liquidity  risk  stemming  from  the  various  financial  institutions  used  for  the 
management of its liquidity risks; 

(e) where prearranged and highly reliable funding arrangements, committed lines of 
credit  or  similar  arrangements  are  used,  it  shall  select  only  creditworthy  financial 
institutions  as 
it  shall  establish  and  apply  appropriate 
concentration  limits  for  each  of  the  corresponding  liquidity  providers  including  its 
parent undertaking and subsidiaries;’; 

liquidity  providers; 

(ii) point (i) is replaced by the following: 

‘(i) 
it shall have prearranged and highly reliable arrangements to ensure that it can 
convert  in  a  timely  fashion  the  collateral  provided  to  it  by  a  defaulting  client  into 
cash and where non-committed arrangements are used, establish that any associated 
potential risks have been identified and mitigated;’; 

(iii) the following point (k) is added:  

‘(k)  it  shall  adequately  monitor  and  manage  any  risks,  including  relevant  netting 
arrangements in relation to the cash leg of their applied settlement model.’; 

(b) in paragraph 5, the second subparagraph is replaced by the following:  

‘EBA shall submit those draft regulatory technical standards to the Commission by 
…  [PO  please  insert  the  date  =  1  year  after  the  date  of  entry  into  force  of  this 
Regulation].’; 

(20) Article 60 is amended as follows: 

(a) 

in paragraph 1, the third subparagraph is replaced by the following: 

‘The competent authorities referred to in the first subparagraph shall regularly, and at 
least once a year, assess whether the designated credit institution or CSD authorised 
to provide banking-type ancillary services complies with Article 59 and shall inform 
the competent authority of the CSD which shall then inform the authorities referred 
to in Article 55(4) and, where applicable, the colleges referred to in Article 24a, of 
the results, including any remedial actions or penalties, of its supervision under this 
paragraph.’; 

(b) 

in paragraph 2, the second subparagraph is replaced by the following: 

‘The competent authority of the CSD shall regularly, and at least once a year, inform 
the authorities referred to in Article 55(4) and, where applicable, the colleges referred 

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to  in  Article  24a,  of  the  results,  including  any  remedial  actions  or  penalties,  of  its 
review and evaluation under this paragraph.’; 

(21) Article 67 is amended as follows: 

(a) 

the following paragraph 2a is inserted:  

‘2a. The power to adopt delegated acts referred to in Articles 7(14a), 24a(8), 25(13) 
and 54(9) shall be conferred on the Commission for an indeterminate period of time 
from [PO please insert the date of entry into force of this Regulation].’; 

(b)  paragraph 3 is replaced by the following: 

‘3. The delegation of power referred to in Articles 2(2), 7(14), 24(7), 7(14a), 24a(8), 
25(13) and 54(9) may be revoked at any time by the European Parliament or by the 
Council.  A  decision  of  revocation  shall  put  an  end  to  the  delegation  of  the  power 
specified in that decision. It shall take effect the day following the publication of the 
decision  in  the  Official  Journal  of  the  European  Union  or  at  a  later  date  specified 
therein. It shall not affect the validity of any delegated acts already in force.’; 

(c) 

paragraph 5 is replaced by the following: 

‘5.  A  delegated  act  adopted  pursuant  to  Articles  2(2),  7(14),  24(7),  7(14a),  24a(8), 
25(13) and 54(9) shall enter into force only if no objection has been expressed either 
by  the  European  Parliament  or  the  Council  within  a  period  of  three  months  of 
notification of that act to the European Parliament and the Council or if, before the 
expiry of that period, the European Parliament and the Council have both informed 
the  Commission  that  they  will  not  object.  That  period  shall  be  extended  by  three 
months at the initiative of the European Parliament or of the Council.’ 

(22) in Article 68, the following paragraph 3 is added:  

“3.  Where  reference  is  made  to  this  paragraph,  Article  8  of  Regulation  (EU)  No 
182/2011, in conjunction with Article 5 thereof, shall apply.”; 

(23) Article 69 is amended as follows:  

(a) 

paragraph 4 is replaced by the following:  

‘4. The national rules on the authorisation of CSDs shall continue to apply until the 
following date, whichever is earlier:  

(a)  the  date  when  a  decision  is  made  under  this  Regulation  on  the  authorisation  of 
CSDs and of their activities, including CSD links; or  

(b) …  [PO please insert the date = 1  year after the date of entry into force of  this 
Regulation].’; 

(b) 

the following paragraphs 4a, 4b and 4c are inserted:  

‘4a.  The  national  rules  on  the  recognition  of  third-country  CSDs  shall  continue  to 
apply until the following date, whichever is earlier:  

(a) the date when a decision is made under this Regulation on the recognition of the 
respective third-country CSDs and of their activities; or 

(b) … [PO please insert the date = 3 years after the date of entry into force of this 
Regulation]. 

A third-country CSD that provides the core services referred to in Section A, points 
(1)  and  (2),  of  the  Annex  in  relation  to  financial  instruments  constituted  under  the 

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law of a Member State referred to in Article 49(1), second subparagraph pursuant to 
the applicable national rules on the recognition of third-country CSDs shall submit a 
notification  to  ESMA  within  2  years  from  [PO  please  insert  the  date  of  entry  into 
force of this Regulation]. 

ESMA shall develop draft regulatory technical standards to specify the information 
that the third- country CSD shall provide to ESMA in the notification referred to in 
the  second  subparagraph.  Such  information  shall  be  limited  to  what  is  strictly 
necessary including, where applicable and available:  

(a) 

(b) 

the number of participants to whom the third-country CSD provides the 
services referred to in the second subparagraph;  

the  categories  of  financial  instruments  in  respect  of  which  the  third-
country CSD provides such services; and  

(c) 

the total volume and value of such financial instruments.  

ESMA shall submit those draft regulatory technical standards to the Commission by 
[PO  please  insert  the  date  =  1  year  after  the  date  of  entry  into  force  of  this 
Regulation].  

Power is delegated to the Commission to supplement this Regulation by adopting the 
regulatory technical standards referred to in the first subparagraph in accordance with 
Articles 10 to 14 of Regulation (EU) No 1095/2010. 

4b.  A  third-country  CSD  that  provided  the  core  service  referred  to  in  Section  A, 
point (3), of the Annex in relation to financial instruments constituted under the law 
of a Member State referred to in Article 49(1), before … [PO please enter the date of 
entry into force of this Regulation] shall submit the notification referred to in Article 
25(2a)  within  2  years  from  …[PO  please  insert  the  date  of  entry  into  force  of  this 
Regulation].  

4c. Where a CSD has submitted a complete application for recognition in accordance 
with  Article  25(4),  (5)  and  (6)  before  …  [PO  please  insert  the  date  =  the  date  of 
entry  into  force  of  this  Regulation]  but  ESMA  has  not  issued  a  decision  in 
accordance with Article 25(6) by that date, the national rules on recognition of CSDs 
shall continue to apply until the ESMA decision is issued.’;  

(c) 

the following paragraph 6 is added: 

‘6.  Home  competent  authorities  shall  establish  and  manage  colleges  pursuant  to 
Article 24a for all CSDs providing their services in relation to financial instruments 
constituted under the law of another Member State pursuant to Article 23(2) before 
… [PO please insert the date = the date of entry into force of this Regulation] or for 
CSDs that belong to a group that comprises other CSDs by … [PO please insert the 
date = 4 months after the date of entry into force of this Regulation].’; 

(24) Article 74 is amended as follows:  

(a) 

paragraph 1 is amended as follows: 

(i) the introductory wording is replaced by the following: 

‘ESMA  shall,  in  cooperation  with  EBA  and  the  competent  authorities  and  the 
relevant  authorities,  submit  reports  to  the  Commission  providing  assessments  of 
trends, potential risks and vulnerabilities, and, where necessary, recommendations of 

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preventative  or  remedial  action  in  the  markets  for  services  covered  by  this 
Regulation. Those reports shall include an assessment of the following:’; 

(ii) point (a) is replaced by the following: 

‘(a) settlement efficiency for domestic and cross-border operations for each Member 
State  based  on  the  number  and  volume  of  settlement  fails  and  their  evolution, 
including  an  analysis  of  the  impact  of  cash  penalties  on  settlement  fails  across 
instruments,  the  duration  and  main  drivers  of  settlement  fails,  the  categories  of 
financial instruments and markets where the highest settlement fail rates are observed 
and an international comparison of settlement fail rates, including an assessment of 
the amount of penalties referred to in Article 7(2), and, where applicable, the number 
and volumes of buy-in transactions referred to in Article 7(3) and (4) as well as any 
other relevant criteria;’; 

(iii) the following point (l) is added: 

‘(l) the handling of notifications submitted in accordance with Article 25(2a);’; 

(b) 

the following paragraph 1a is inserted:  

‘1a. The reports referred to in paragraph 1 shall be submitted to the Commission as 
follows: 

(a) 

at  least  every  2  years from  …  [PO please insert  the  date = the date of  entry 
into force of this Regulation] for the report referred to in paragraph 1,point (a); 

(b) 

every 2 years for the reports referred to in paragraph 1, points (b) and (c); 

(c) 

on an annual basis until … [PO please insert the date = 1 year after the date of 
entry into force of this Regulation] and every 3 years from … [PO please insert 
the date = 1  year after the date of entry into force of this Regulation], for the 
reports referred to in paragraph 1, points (d) and (f); 

(d)  upon request from the Commission, for the reports referred to in  paragraph 1, 

points (e), (h), (j) and (k); 

(e) 

on an annual basis until … [PO please insert the date = 1 year after the date of 
entry into force of this Regulation] and every 2 years from … [PO please insert 
the date =  1  year after  the date of  entry into force of this Regulation] for the 
reports referred to in paragraph 1, points (i) and (l).’; 

(c) 

paragraph 2 is replaced by the following:  

‘2. The reports referred to in paragraph 1 shall be  communicated to the Commission 
by 30 April of the relevant year as determined in accordance with the periodicity set 
out in paragraph 1a.’; 

(25) Article 75 is replaced by the following:  

‘Article 75 

Review 

By … [PO please insert the date = 5 years after the date of entry into force of this 
Regulation],  the  Commission  shall  review  and  prepare  a  general  report  on  this 
Regulation.  That  report  shall,  in  particular,  assess  the  matters  referred  to  in  Article 
74(1), points (a) to (l), establish whether there are substantive barriers to competition 
in  relation  to  the  services  subject  to  this  Regulation  which  are  insufficiently 
addressed and set out the potential need to apply further measures to:  

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43 

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(a) improve settlement efficiency;  

(b) limit the impact on taxpayers of the failure of CSDs; 

(c) minimise barriers to cross-border settlement; 

(d) ensure adequate powers and information for authorities to monitor risks. 

The  Commission  shall  submit  the  report  to  the  European  Parliament  and  to  the 
Council, together with any appropriate proposals.’;  

Article 2 

Entry into force and application 

This Regulation shall enter into force on the twentieth day following that of its publication in 
the Official Journal of the European Union. 

However, Article 1, point (2)(a), point (9), point (10)(a), point (17)(c), point (19)(a) and point 
(23)(b),  second  subparagraph,  shall  apply  from  ….  [PO  please  insert  the  date  =  24  months 
after the date of entry into force of this Regulation].  

This Regulation shall be binding in its entirety and directly applicable in all Member States. 

Done at Brussels, 

For the European Parliament 
The President 

For the Council 
The President 

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LEGISLATIVE FINANCIAL STATEMENT 

1. 

FRAMEWORK OF THE PROPOSAL/INITIATIVE 

1.1.  Title of the proposal/initiative 

1.2.  Policy area(s) concerned 

1.3.  The proposal/initiative relates to: 

1.4.  Objective(s) 

1.4.1. General objective(s) 

1.4.2. Specific objective(s) 

1.4.3. Expected result(s) and impact 

1.4.4. Indicators of performance 

1.5.  Grounds for the proposal/initiative 

1.5.1. Requirement(s)  to  be  met  in  the  short  or  long  term  including  a  detailed 
timeline for roll-out of the implementation of the initiative 

1.5.2. Added  value  of  Union  involvement  (it  may  result  from  different  factors,  e.g. 
coordination gains, legal certainty, greater effectiveness or complementarities). For 
the purposes of this point 'added value of Union involvement' is the value resulting 
from  Union  intervention  which  is  additional  to  the  value  that  would  have  been 
otherwise created by Member States alone. 

1.5.3. Lessons learned from similar experiences in the past 

1.5.4. Compatibility  with  the  Multiannual  Financial  Framework  and  possible 
synergies with other appropriate instruments 

1.5.5. Assessment  of  the  different  available  financing  options,  including  scope  for 
redeployment 

1.6.  Duration and financial impact of the proposal/initiative 

1.7.  Management mode(s) planned 

2.  MANAGEMENT MEASURES 

2.1.  Monitoring and reporting rules 

2.2.  Management and control system(s) 

2.2.1. Justification  of 
mechanism(s), the payment modalities and the control strategy proposed 

the  management  mode(s), 

funding 

the 

implementation 

2.2.2. Information  concerning the risks identified and the internal control  system(s) 
set up to mitigate them 

2.2.3. Estimation  and  justification  of  the  cost-effectiveness  of  the  controls  (ratio  of 
"control  costs  ÷  value  of  the  related  funds  managed"),  and  assessment  of  the 
expected levels of risk of error (at payment & at closure) 

2.3.  Measures to prevent fraud and irregularities 

3. 

ESTIMATED FINANCIAL IMPACT OF THE PROPOSAL/INITIATIVE 

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3.1.  Heading(s)  of  the  multiannual  financial  framework  and  expenditure 
budget line(s) affected 

3.2.  Estimated financial impact of the proposal on appropriations 

3.2.1. Summary of estimated impact on operational appropriations 

3.2.2. Estimated output funded with operational appropriations 

3.2.3. Summary of estimated impact on administrative appropriations 

3.2.4. Compatibility with the current multiannual financial framework 

3.2.5. Third-party contributions 

3.3.  Estimated impact on revenue 

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LEGISLATIVE FINANCIAL STATEMENT 

1. 

FRAMEWORK OF THE PROPOSAL/INITIATIVE  

1.1. 

Title of the proposal/initiative 

Proposal for a Regulation of the European Parliament and of the Council amending 
Regulation  (EU)  No  904/2014  on  improving  securities  settlement  in  the  European 
Union and on central securities depositories and amending Directives 98/26/EC and 
2014/65/EU and Regulation (EU) No 236/2012.  

1.2. 

Policy area(s) concerned  

Internal Market – Financial Services. 

1.3. 

The proposal/initiative relates to:  

 a new action  

 a new action following a pilot project/preparatory action44  

 the extension of an existing action  

 a merger or redirection of one or more actions towards another/a new action  

1.4. 

Objective(s) 

1.4.1.  General objective(s) 

Contribute to a deeper and fairer internal market – create a more efficient and stable 
market for settlement in the EU.  

1.4.2. 

Specific objective(s) 

Specific objective No 

This proposal has the following specific objectives to achieve the general objectives 
for the EU internal market for CSD services: 

Reduce  administrative  burden  and  compliance  costs,  without  endangering 

- 
financial stability; 

- 

- 

Minimise barriers to cross-border settlement; 

Ensure adequate powers and information to monitor risks. 

Expected result(s) and impact 

Specify the effects which the proposal/initiative should have on the beneficiaries/groups targeted. 

The proposal aims for more proportionate rules in the area of passporting, settlement 
discipline as well as in the area of banking services so that market players can benefit 
from enhanced cross-border provision of services, e.g. in the area of foreign currency 
settlement  and  a  more  proportionate  supervision,  e.g.  colleges,  third-country 
supervision as well as supervisory cooperation. 

1.4.3. 

Indicators of performance 

Specify the indicators for monitoring progress and achievements. 

44 

As referred to in Article 58(2)(a) or (b) of the Financial Regulation. 

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For each specific objective the following performance indicators have been set.  

Reduce administrative burden and compliance costs (by ESMA): 

- 

- 

EU settlement efficiency rates. 

Average (no. of days) duration of settlement fails.  

- 
Number  of  CSDs  providing  cross-border  services,  able  to  access  banking 
services, providing foreign currency settlement,  able to use the exception under the 
threshold. 

- 

Number of countries in which CSDs provide cross-border services. 

Minimise barriers to cross-border settlement (by ESMA, ESCB, CSDs):  

Number  of  CSDs  providing  cross-border  services,  able  to  access  banking 
- 
services, providing foreign currency settlement,  able to use the exception under the 
threshold. 

- 

- 

Number of countries in which CSDs provide cross-border services. 

Growth of foreign currency settlement.  

Ensure adequate powers and information to monitor risks (by ESMA): 

- 

- 

Number of 3rd country CSDs that have applied for recognition. 

Number of colleges established by EU CSDs. 

1.5. 

Grounds for the proposal/initiative  

1.5.1.  Requirement(s) to be met in the short or long term including a detailed timeline for 

roll-out of the implementation of the initiative 

The  evaluation  of  the  CSDR  after  approximately  5  years  after  its  introduction  in 
2014  has  revealed  that  although  settlement  has  increased  significantly  in  the  EU, 
cross border settlement  has experienced  relative  slower  growth,  mainly due to  sub-
optimal  foreign  currency  settlement  and  otherwise  restrictive  requirements.  In 
addition,  supervisory  tools  and  possibilities  should  keep  pace  with  risks  in  the  EU 
market, such as third-country CSDs that to date benefit form grandfathering from the 
recognition requirement. 

With the implementation of this proposal including its potential further development 
in level 2, the mainly more proportionate requirements are expected to be absorbed 
by  both  the  supervisory  community  as  well  as  the  market  around  one  year  after 
agreement by the co-legislators and its entry into force. 

1.5.2.  Added  value  of  Union  involvement  (it  may  result  from  different  factors,  e.g. 
coordination gains, legal certainty, greater effectiveness or complementarities). For 
the purposes of this point 'added value of Union involvement' is the value resulting 
from  Union  intervention  which  is  additional  to  the  value  that  would  have  been 
otherwise created by Member States alone. 

Reasons for action at European level (ex-ante) 

The EU settlement market is an inseparable part of the EU financial market. As such, 
EU  action  should  ensure  that  CSDR’s  regulatory  requirements  are  more  effective, 
efficient  and  proportionate,  are  applied  uniformly,  and  guarantee  a  sound  and 
consistent  regulatory  framework  for  securities  settlement  in  the  EU  and  the 
operations of CSDs. The EU settlement market is, together with EU financial market, 

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an essential foundation stone for the development of CMU as well as to ensure a safe 
and efficient single market for financial services. 

Expected generated Union added value (ex-post)  

The  objectives  of  CSDR,  namely  to  lay  down  uniform  requirements  for  the 
settlement  of  financial  instruments  in  the  EU  and  rules  on  the  organisation  and 
conduct  of  CSDs,  to  promote  safe,  efficient  and  smooth  settlement  are  an  essential 
building block for a successful EU financial internal market, already given the cross 
– border component.  Member States  and national supervisors cannot  solve on their 
own the promoting or facilitating of cross-border settlement, let alone the framework 
for  third-country  CSDs.  The  2020  CMU  Action  Plan  explicitly  acknowledged  that 
amending CSDR could help develop a more integrated post-trading landscape in the 
EU and thus contribute to the development of CMU. 

1.5.3.  Lessons learned from similar experiences in the past 

This proposal takes into account experiences from other, similar legislative packages 
in the field of financial services. For instance, passporting is a well-known tried and 
tested topic in other areas of financial services. Similarly, third-country regimes are 
also  in  effect  in  other  financial  services  areas  as  are  colleges  of  supervisors;  these 
past  experiences  are  taken  into  account  in  the  design  of  the  new  proposed 
requirements.  

1.5.4.  Compatibility  with  the  Multiannual  Financial  Framework  and  possible  synergies 

with other appropriate instruments 

This proposal and its specific requirements are in line with the current arrangements 
for financial services within the MFF and aligned with standard practices of putting 
the EU budget to work and in line with current DG FISMA practices in planning and 
budgeting for new proposals.  

In addition, the objectives of the initiative are consistent with a number of other EU 
policies and ongoing initiatives that aim to: (i) develop the CMU and (ii) enhance the 
efficiency  and  effectiveness  of  EU-level  supervisory  coordination,  both  within  and 
outside the EU.  

First,  it  is  consistent  with  the  Commission's  ongoing  efforts  to  further  develop  the 
Capital  Markets  Union  ('CMU').  Further  supervisory  convergence  of  settlement 
markets can support the development of deeper and better integrated capital markets, 
as more efficient and resilient CSDs are essential elements for the well-functioning 
of CMU. The urgency of further developing and integrating EU capital markets was 
stressed in the Action Plan on CMU of September 2020. Conversely, the emergence 
of larger and more liquid financial markets implied by CMU will result in even more 
transactions  being  settled  through  CSDs,  and  will  further  increase  the  systemic 
relevance of CSDs. Given the potential for increased volumes, further enhancements 
of  the  supervisory  framework  are  required  in  order  to  ensure  a  strong  and  stable 
CMU. 

Furthermore,  it  is  consistent  with  Action  16  of  the  2020  CMU  Action  Plan  which 
underlined that the Commission will work towards an enhanced single rulebook for 
capital  markets  by  assessing  the  need  for  further  harmonisation  of  EU  rules  and 
monitoring  progress  towards  supervisory  convergence  noting  that  the  Commission 
may  consider  proposing,  amongst  others,  measures  for  stronger  supervisory 
coordination by the European Supervisory Authorities. 

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. 

Third,  it  is  consistent  with  the  Commission  equivalence  policy  with  non-EU 
countries as set out in the 2019 Commission Communication on equivalence in the 
area of financial services. .  

1.5.5.  Assessment  of  the  different  available  financing  options,  including  scope  for 

redeployment 

N/A 

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1.6. 

Duration and financial impact of the proposal/initiative 

 limited duration  

–    in effect from [DD/MM]YYYY to [DD/MM]YYYY  

–    Financial  impact  from  YYYY  to  YYYY  for  commitment  appropriations  and 

from YYYY to YYYY for payment appropriations.  

 unlimited duration 

–  Implementation with a start-up period from YYYY to YYYY, 

–  followed by full-scale operation. 

1.7.  Management mode(s) planned45  

 Direct management by the Commission 

–   by its departments, including by its staff in the Union delegations;  

–    by the executive agencies  

 Shared management with the Member States  

 Indirect management by entrusting budget implementation tasks to: 

–   third countries or the bodies they have designated; 

–   international organisations and their agencies (to be specified); 

–   the EIB and the European Investment Fund; 

–   bodies referred to in Articles 70 and 71 of the Financial Regulation; 

–   public law bodies; 

–   bodies governed by private law with a public service mission to the extent that 

they are provided with adequate financial guarantees; 

–   bodies governed by the private law of a Member State that are entrusted with 
the  implementation  of  a  public-private  partnership  and  that  are  provided  with 
adequate financial guarantees; 

–    persons  entrusted  with  the  implementation  of  specific  actions  in  the  CFSP 

pursuant to Title V of the TEU, and identified in the relevant basic act. 

– 

If more than one management mode is indicated, please provide details in the ‘Comments’ section. 

Comments  

N/A 

45 

Details of management modes and references to the Financial Regulation may be found on the 
BudgWeb site: 
https://myintracomm.ec.europa.eu/budgweb/EN/man/budgmanag/Pages/budgmanag.aspx  

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2. 

MANAGEMENT MEASURES  

2.1.  Monitoring and reporting rules  

Specify frequency and conditions. 

In  line  with  already  existing  arrangements  ESMA  prepares  regular  reports  on  its 
activity  (including  internal  reporting  to  Senior  Management,  MB  reporting,  six 
month activity reporting to the Board of Supervisors and the production of the annual 
report), and undergoes audits by the Court of Auditors and the Internal Audit Service 
on its use of resources. Monitoring and reporting of the present proposed actions will 
comply with the same already existing requirements.  

2.2.  Management and control system(s)  

2.2.1. 

Justification of the management mode(s), the funding implementation mechanism(s), 
the payment modalities and the control strategy proposed 

In  relation  to  the  legal,  economic,  efficient  and  effective  use  of  appropriations 
resulting  from  the  proposal,  it  is  expected  that  the  proposal  would  not  bring  about 
new  risks  that  would  not  be  currently  covered  by  an  existing  internal  control 
framework. 

2.2.2. 

Information concerning the risks identified and the internal control system(s) set up 
to mitigate them 

Management  and  control  systems  as  provided  for  in  the  ESMA  Regulation  are 
already implemented. ESMA works closely together with the Internal Audit Service 
of  the  Commission  to  ensure  that  the  appropriate  standards  are  met  in  all  internal 
controls areas. These arrangements will apply also with regard to the role of ESMA 
according  to  the  present  proposal.  Annual  internal  audit  reports  are  sent  to  the 
Commission, Parliament and Council. 

2.2.3.  Estimation and justification of the cost-effectiveness of the controls (ratio of "control 
costs ÷ value of the related funds managed"), and assessment of the expected levels 
of risk of error (at payment & at closure)  

N/A 

2.3.  Measures to prevent fraud and irregularities  

Specify existing or envisaged prevention and protection measures, e.g. from the Anti-Fraud Strategy. 

For  the  purposes  of  combating  fraud,  corruption  and  any  other  illegal  activity,  the 
provisions of Regulation (EC) No 1073/1999 of the European Parliament and of the 
Council of 25 May 1999 concerning investigations conducted by the European Anti-
Fraud Office (OLAF) shall apply to ESMA without any restrictions.  

ESMA shall accede to the Interinstitutional Agreement of 25 May 1999 between the 
European Parliament, the Council of the European Union and the Commission of the 
European  Communities  concerning  internal  investigations  by  the  European  Anti-
Fraud  Office  (OLAF)  and  shall  immediately  adopt  appropriate  provisions  for  all 
ESMA staff. 

The  funding  decisions  and  the  agreements  and  the  implementing  instruments 
resulting  from  them  shall  explicitly  stipulate  that  the  Court  of  Auditors  and  OLAF 

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may, if need be, carry out on the spot checks on the beneficiaries of monies disbursed 
by ESMA as well as on the staff responsible for allocating these monies. 

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3. 

3.1. 

ESTIMATED FINANCIAL IMPACT OF THE PROPOSAL/INITIATIVE  

Heading(s)  of  the  multiannual  financial  framework  and  expenditure  budget 
line(s) affected  

  Existing budget lines  

In order of multiannual financial framework headings and budget lines. 

Budget line 

Heading of 
multiannual 
financial 
framework 

Number  

[XX.YY.YY.YY] 

Type of  
expenditure 

Diff./Non-
diff.46 

Diff./Non
-diff. 

Contribution  

from 
EFTA 
countries
47 

from 
candidate 
countries48 

from third 
countries 

within the 
meaning of 
Article 21(2)(b) of 
the Financial 
Regulation  

YES/NO  YES/NO  YES/NO 

YES/NO 

  New budget lines requested  

In order of multiannual financial framework headings and budget lines. 

Budget line 

Type of 
expenditure 

Contribution  

Heading of 
multiannual 
financial 
framework 

Number  

[XX.YY.YY.YY] 

Diff./Non-
diff. 

from 
EFTA 
countries 

from 
candidate 
countries 

from third 
countries 

within the 
meaning of 
Article 21(2)(b) of 
the Financial 
Regulation  

YES/NO  YES/NO  YES/NO 

YES/NO 

46 
47 
48 

Diff. = Differentiated appropriations / Non-diff. = Non-differentiated appropriations. 
EFTA: European Free Trade Association.  
Candidate countries and, where applicable, potential candidates from the Western Balkans. 

EN 

54 

  EN 

 
 
 
 
 
 
 
 
 
                                                 
3.2. 

Estimated financial impact of the proposal on appropriations  

3.2.1. 

Summary of estimated impact on operational appropriations  

–    The proposal/initiative does not require the use of operational appropriations  

–    The proposal/initiative requires the use of operational appropriations, as explained below: 

EUR million (to three decimal places) 

Year 
N49 

Year 
N+1 

Year 
N+2 

Year 
N+3 

Enter as many years as 
necessary to show the duration 
of the impact (see point 1.6) 

TOTAL 

Heading of multiannual financial  
framework  

Number 

DG: <…….> 

 Operational appropriations  

Budget line50 

Budget line 

Commitments 

Payments 

Commitments 

Payments 

(1a) 

(2a) 

(1b) 

(2b) 

Appropriations  of  an  administrative  nature  financed  from  the 
envelope of specific programmes51  

Budget line 

TOTAL appropriations 
for DG <…….> 

Commitments 

Payments 

(3) 

=1a+1b 
+3 

=2a+2b 

49 

50 
51 

Year N is the year in which implementation of the proposal/initiative starts. Please replace "N" by the expected first year of implementation (for instance: 2021). The same  for the 
following years. 
According to the official budget nomenclature. 
Technical and/or administrative assistance and expenditure in support of the implementation of EU programmes and/or actions (former ‘BA’ lines), indirect research, direct research. 

EN 

55 

EN 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                 
 TOTAL operational appropriations  

Commitments 

Payments 

  TOTAL  appropriations  of  an  administrative  nature 
financed from the envelope for specific programmes  

+3 

(4) 

(5) 

(6) 

TOTAL appropriations  
under HEADING <….> 
of the multiannual financial framework 

Commitments 

=4+ 6 

Payments 

=5+ 6 

If more than one operational heading is affected by the proposal / initiative, repeat the section above: 

  TOTAL  operational  appropriations  (all 
operational headings) 

Commitments 

Payments 

 TOTAL appropriations of an administrative nature financed 
from  the  envelope  for  specific  programmes  (all  operational 
headings) 

(4) 

(5) 

(6) 

TOTAL appropriations  
under HEADINGS 1 to 6 
of the multiannual financial framework 
(Reference amount) 

Commitments 

=4+ 6 

Payments 

=5+ 6 

EN 

56 

EN 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Heading of multiannual financial  
framework  

7 

‘Administrative expenditure’ 

This section should be filled in using the 'budget data of an administrative nature' to be firstly introduced in the Annex to the Legislative 
Financial Statement (Annex V to the internal rules), which is uploaded to DECIDE for interservice consultation purposes. 

Year 
N 

Year 
N+1 

Year 
N+2 

Year 
N+3 

Enter as many years as 
necessary to show the duration 
of the impact (see point 1.6)  

TOTAL 

EUR million (to three decimal places) 

DG: <…….> 

 Human resources  
 Other administrative expenditure  

TOTAL DG <…….> 

Appropriations  

TOTAL appropriations 
under HEADING 7 
of the multiannual financial framework  

(Total  commitments  = 
Total payments) 

TOTAL appropriations  
under HEADINGS 1 to 7 
of the multiannual financial framework  

Commitments 

Payments 

Year 
N52 

Year 
N+1 

Year 
N+2 

Year 
N+3 

Enter as many years as 
necessary to show the duration 
of the impact (see point 1.6) 

TOTAL 

EUR million (to three decimal places) 

52 

Year N is the year in which implementation of the proposal/initiative starts. Please replace "N" by the expected first year of implementation (for instance: 2021). The same  for the 
following years. 

EN 

57 

EN 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                 
3.2.2.  Estimated output funded with operational appropriations  

Year 
N 

Year 
N+1 

Year 
N+2 

Year 
N+3 

OUTPUTS 

Commitment appropriations in EUR million (to three decimal places) 

Enter as many years as necessary to show the 
duration of the impact (see point 1.6) 

TOTAL 

o
N

Cost 

o
N

Cost 

o
N

Cost 

o
N

Cost 

o
N

Cost  N

o

Cost 

o
N

Cost 

Total 
No 

Total 
cost 

Indicate 
objectives and 
outputs  

 

Type53 

Avera
ge 
cost 

SPECIFIC OBJECTIVE No 154… 

- Output 

- Output 

- Output 

Subtotal for specific objective No 1 

SPECIFIC OBJECTIVE No 2 ... 

- Output 

Subtotal for specific objective No 2 

TOTALS 

53 
54 

Outputs are products and services to be supplied (e.g.: number of student exchanges financed, number of km of roads built, etc.). 
As described in point 1.4.2. ‘Specific objective(s)…’  

EN 

58 

EN 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                 
3.2.3. 

Summary of estimated impact on administrative appropriations  

–    The  proposal/initiative  does  not  require  the  use  of  appropriations  of  an 

administrative nature  

–    The proposal/initiative requires the use of appropriations of an administrative 

nature, as explained below: 

EUR million (to three decimal places) 

Year 
N 55 

Year 
N+1 

Year 
N+2 

Year 
N+3 

Enter as many years as necessary to show the 
duration of the impact (see point 1.6) 

TOTAL 

HEADING 7 
of the multiannual 
financial framework 

Human resources  

Other administrative 
expenditure  

Subtotal HEADING 7 
of the multiannual 
financial framework  

Outside HEADING 756  
of the multiannual 
financial framework  

Human resources  

Other expenditure  
of an administrative 
nature 

Subtotal  
outside HEADING 7 
of the multiannual 
financial framework  

TOTAL 

The  appropriations  required  for  human  resources  and  other  expenditure  of  an  administrative  nature  will  be  met  by 
appropriations from the DG that are already assigned to management of the action and/or have been redeployed within the 
DG,  together  if  necessary  with  any  additional  allocation  which  may  be  granted  to  the  managing  DG  under  the  annual 
allocation procedure and in the light of budgetary constraints. 

55 

56 

Year N is the year in which implementation of the proposal/initiative starts. Please replace "N" by the expected first 
year of implementation (for instance: 2021). The same for the following years. 
Technical  and/or  administrative  assistance  and  expenditure  in  support  of  the  implementation  of  EU programmes 
and/or actions (former ‘BA’ lines), indirect research, direct research. 

EN 

59 

  EN 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                 
3.2.3.1.  Estimated requirements of human resources  

–    The proposal/initiative does not require the use of human resources.  

–    The  proposal/initiative  requires  the  use  of  human  resources,  as  explained 

below: 

Estimate to be expressed in full time equivalent units 

Year 
N 

Year 
N+1 

Year 
N+2 

Year 
N+3 

Enter as many years as 
necessary to show the duration 
of the impact (see point 1.6) 

 Establishment plan posts (officials and temporary staff) 

20 01 02 01 (Headquarters and Commission’s Representation 
Offices) 

20 01 02 03 (Delegations) 

01 01 01 01 (Indirect research) 

 01 01 01 11 (Direct research) 

Other budget lines (specify) 

 External staff (in Full Time Equivalent unit: FTE)57 

20 02 01 (AC, END, INT from the ‘global envelope’) 

20 02 03 (AC, AL, END, INT and JPD in the delegations) 

XX 01 xx yy zz 58 

- at Headquarters 

- in Delegations  

01 01 01 02 (AC, END, INT - Indirect research) 

 01 01 01 12 (AC, END, INT - Direct research) 

Other budget lines (specify) 

TOTAL 

XX is the policy area or budget title concerned. 

The human resources required will be met by staff from the DG who are already assigned to management of the 
action  and/or  have  been  redeployed  within  the  DG,  together  if  necessary  with  any  additional  allocation  which 
may  be  granted  to  the  managing  DG  under  the  annual  allocation  procedure  and  in  the  light  of  budgetary 
constraints. 

Description of tasks to be carried out: 

Officials and temporary staff 

External staff 

57 

58 

AC=  Contract  Staff;  AL  =  Local  Staff;  END=  Seconded  National  Expert;  INT  =  agency  staff; 
JPD= Junior Professionals in Delegations.  
Sub-ceiling for external staff covered by operational appropriations (former ‘BA’ lines). 

EN 

60 

  EN 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                 
3.2.4.  Compatibility with the current multiannual financial framework  

The proposal/initiative: 

–    can be fully financed through redeployment within the relevant heading of the 

Multiannual Financial Framework (MFF). 

Explain what reprogramming is required, specifying the budget lines concerned and the corresponding 
amounts. Please provide an excel table in the case of major reprogramming. 

–    requires use of the unallocated margin under the relevant heading of the MFF 

and/or use of the special instruments as defined in the MFF Regulation. 

Explain  what  is  required,  specifying  the  headings  and  budget  lines  concerned,  the  corresponding 
amounts, and the instruments proposed to be used. 

–    requires a revision of the MFF. 

Explain what is required, specifying the headings and  budget lines concerned and the corresponding 
amounts. 

3.2.5.  Third-party contributions  

The proposal/initiative: 

–    does not provide for co-financing by third parties 

–    provides for the co-financing by third parties estimated below: 

Appropriations in EUR million (to three decimal places) 

Year 
N59 

Year 
N+1 

Year 
N+2 

Year 
N+3 

Enter as many years as necessary 
to show the duration of the 
impact (see point 1.6) 

Total 

Specify  the  co-financing 
body  

TOTAL appropriations 
co-financed  

59 

Year N is the year in which implementation of the proposal/initiative starts. Please replace "N" by the 
expected first year of implementation (for instance: 2021). The same for the following years. 

EN 

61 

  EN 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                 
3.3. 

Estimated impact on revenue  

–    The proposal/initiative has no financial impact on revenue. 

–    The proposal/initiative has the following financial impact: 

 

 

on own resources  

on other revenue 

please indicate, if the revenue is assigned to expenditure lines  

Appropriations 
available for 
the current 
financial year 

Budget revenue line: 

Article …………. 

EUR million (to three decimal places) 

Impact of the proposal/initiative60 

Year 
N 

Year 
N+1 

Year 
N+2 

Year 
N+3 

Enter as many years as necessary to show 
the duration of the impact (see point 1.6) 

For assigned revenue, specify the budget expenditure line(s) affected. 

Other  remarks  (e.g.  method/formula  used  for  calculating  the  impact  on  revenue  or  any  other 
information).  

60 

As regards traditional own resources (customs duties, sugar levies), the amounts indicated must be net 
amounts, i.e. gross amounts after deduction of 20 % for collection costs. 

EN 

62 

  EN