COMMISSION STAFF WORKING DOCUMENT EXECUTIVE SUMMARY OF THE IMPACT ASSESSMENT Accompanying the document 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  SWD(2022) 76 final  COMMISSION STAFF WORKING DOCUMENT  EXECUTIVE SUMMARY OF THE IMPACT ASSESSMENT  Accompanying the document 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   {COM(2022) 120 final} - {SEC(2022) 160 final} - {SWD(2022) 75 final}  
 
 
Executive Summary Sheet 

Impact assessment on [proposal for CSDR REFIT]. 

A. Need for action 

Why? What is the problem being addressed?  
Central securities depositories (CSDs) have an essential role in the financing of an economy, recording issuance 
and  subsequent  changes  in  the  legal  ownership  of  all  securities  transactions.  End  2019,  EUR  53  trillion  of 
securities were held by EU CSDs and transactions completed valued around EUR 1 120 trillion. 

In  2014,  the  aim  of  CSDR  was  to  facilitate  cross-border  settlement,  enhance  the  safety  of  settlement  markets 
and make settlement more efficient. Seven years after CSDR’s adoption, stakeholders see: (i) limited progress in 
the  provision  of  cross-border  services  by  CSDs;  (ii)  specific  areas  where  the  compliance  costs  are 
disproportionate;  and  (iii)  EU  authorities  indicating  that  there  is  insufficient  insight  into  the  activities  of  third-
country CSDs. The evaluation identified the following  reasons for these problems: (i) burdensome and unclear 
passporting requirements; (ii) insufficient cooperation between authorities in home and host Member States; (iii) 
restrictive  requirements  for  the  provision  of  banking  services;  (iv)  unclear  and  burdensome  requirements  for 
settlement discipline; and (v) insufficient information about the activities of third-country CSDs in the EU. If these 
problems are not addressed, a crucial foundation stone of a capital markets union will remain inefficient, to the 
detriment  of  investors,  issuers,  banks,  and  CSDs.  The  EU  post-trade  landscape  will  remain  fragmented  along 
national  lines,  impairing  investment  and  limiting  opportunities  for  issuance,  to  the  detriment  of  the  financial 
system and growth in the EU.  

What is this initiative expected to achieve?  
The  aim  remains  to  ensure  the  safety  and  efficiency  of  settlement  markets.  It  specifically  aims  to  simplify  the 
passporting  regime,  enhance  cooperation  between  supervisors  in  the  EU,  enhance  CSDs’  access  to  banking 
services related to settlement, clarify and make more proportionate settlement discipline measures and ensure 
that EU authorities have the necessary information on the activities of third-country CSDs. 

What is the value added of action at the EU level?  
The 2020 Capital Markets Union Action Plan (CMU) underlined that amending CSDR could help develop a more 
integrated post-trading landscape in the EU and contribute to the development of CMU. The objectives of CSDR 
cannot  be  achieved  by  the  Member  States  and  national  supervisors  alone:  they  cannot  solve  the  difficulties 
arising  from  burdensome  and  unclear  requirements  or  the  risks  resulting  from  diverging  national  supervisory 
practices,  in  particular  where  they  stem  from  primary  or  secondary  legislation.  National  authorities  cannot 
address risks to EU financial stability that could potentially arise from the lack of information on the activities of 
third-country CSDs. As such, the objectives of CSDR can, due to the scale and nature of the actions, be better 
achieved at EU level in accordance with the principle of subsidiarity as set out in Article 5 of the TFEU. 

B. Solutions 

What  legislative  and  non-legislative  policy  options  have  been  considered?  Is  there  a  preferred 
choice or not? Why?  
The  proposed  package  of  options  includes:  a  simplified  passporting  procedure  for  cross-border  services; 
establishment  of  mandatory  supervisory  colleges;  facilitating  the  provision  of  banking-type  ancillary  services; 
amendments to the settlement discipline regime; and changes to the rules for third-country CSDs. 

The  proposed  policy  options  are  legislative,  as  the  operation  of  settlement  services  in  the  EU  is  governed  by 
CSDR. CSDR has a comprehensive regulatory framework for the settlement of financial instruments  in the EU 
as  well  as  common  rules  on  the  organisation  and  conduct  of  CSDs  to  promote  safe  and  efficient  settlement. 
CSDs are systemically important institutions for financial markets and need to operate under a unified regulatory 
framework to ensure the integrity of the single market for financial services. Indeed, many of the problems stem 
from the provisions of CSDR. For these reasons, in general, non-legislative options were not considered.  

A  wide  range  of  options  were  assessed  to  address  the  problems  identified.  Some  were  discarded  at  an  early 
stage as inconsistent with the EU legal framework or with the aim to ensure a resilient and efficient market for 
settlement in the EU, i.e. introducing a requirement for central banks to facilitate CSDs’ access to central bank 
money or an unlimited use of banks to provide banking-type ancillary services. Others were dismissed as cost 

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inefficient (introduction of EU supervision).  

Who supports which option?  
The  chosen  options  enjoy  broad  stakeholder  support.  The  majority  of  stakeholders  support,  in  general  terms, 
measures to facilitate the cross-border provision of services. CSDs, in particular, strongly support clarifications to 
the  passporting  rules  and  the  rules  for  banking-type  ancillary  services.  Many  stakeholders  support  enhanced 
cooperation  between  authorities  or  the  possibility  to  have  more  information  on  third-country  CSDs  providing 
services  in  the  EU.  The  vast  majority  of  respondents  to  the  public  consultation  support  a  more  proportionate 
settlement discipline regime. 

C. Impacts of the preferred option 

What are the benefits of the preferred option (if any, otherwise main ones)?  
The overall package of options will have a positive effect through a more proportionate regulation of CSDs and 
an enhanced competitiveness of the EU settlement market. Simplifying the passporting procedure  with a simple 
notification at host Member State level (instead of a prior approval as currently foreseen) could save CSDs EUR 
10  million  in  the  first  year  and  ca.  EUR  4  million  annually  thereafter.  Supervisory  changes  related  to  the 
establishment of supervisory colleges or amendments to the provision of banking-type ancillary services  would 
streamline  procedures,  resulting  in  more  coherent  supervision  and  easier  access  to  certain  services.  These 
benefits are difficult to quantify, but are expected to be significant for businesses and regulators. With regards to 
the clarification and  postponement of elements of the settlement discipline regime, the main benefits  would be 
deferred costs; i.e. connection costs to buy-in agents for market participants or the amount of trade that  would 
not  disappear  or  migrate  to  non-EU  venues  (estimated  at  4%-5%  of  total  turnover).  The  simplification  of  the 
passporting  procedure  and  more  clarity  on  the  settlement  discipline  regime  could  alleviate  some  of  ESMA’s 
administrative burden in terms of Q&As. Finally, the impact of the preferred policy options on national authorities 
should be generally positive. In particular, NCAs could face lower costs and time spent on passporting if the host 
NCAs are simply notified.  

What are the costs of the preferred option (if any, otherwise main ones)?  
In  terms  of  costs,  ESMA  would  mainly  be  impacted  by  the  participation  in  mandatory  colleges  and  the 
notification requirement for third-country CSDs, although the latter would be one-off cost . The overall impact of 
the preferred policy options on NCAs would be net positive. Costs may be incurred by NCAs due to (i) the need 
to monitor more closely the ancillary banking activities carried out under the new proposed framework (i.e. higher 
thresholds  and  possibility  for  banking  CSDs  to  provide  banking  services  to  non-banking  CSDs)  (ii)  their 
participation  in  (or  organisation  of)  mandatory  colleges.  However,  at  the  same  time,  NCAs  should  face  lower 
costs  from  the  simplified  passporting  procedures.  Finally,  due  to  the  notification  requirement  for  third-country 
CSDs,  NCAs  could  have  increased  information  through  ESMA  to  identify  and  monitor  risks.  These  costs  are 
difficult  to  quantify  but  would  be  limited  as  supervisory  arrangements  are  not  changed.  No  social  or 
environmental impacts are expected. 

How will businesses, SMEs and micro-enterprises be affected? 
The proposed policy options should not have any direct material impact on businesses. However, they will create 
a  more  efficient  and  sound  settlement  system,  notably  through  removing  inefficiencies  and  promoting 
competitiveness  (e.g.  through  measures  to  facilitate  the  cross-border  provision  of  services  and  reduce 
disproportionate  costs).  This  will  indirectly  positively  impact  all  businesses,  but  SMEs  in  particular  who  could 
benefit from lower cost of capital as their, at present, less liquid securities could become more liquid. Together 
the  proposed  amendments  could  help  attract  SMEs  to  capital  markets  and  contribute  to  the  development  of  a 
robust and integrated EU financial market. 

Will there be significant impacts on national budgets and administrations?  
No. The impact of the preferred policy options on NCAs would be limited but generally positive. 

Will there be other significant impacts? 
No. 

D. Follow up 

When will the policy be reviewed?  
The policy’s effectiveness will be considered against CSDR’s general objectives and the specific objectives of the 
review, 5 years after the measures apply. Indicators include: number of CSDs  providing cross-border services; 
number of supervisory colleges established; number of CSDs accessing banking services; growth of settlement 
in foreign currencies; settlement efficiency rates; number of third-country CSDs applying for recognition/filing a 
notification.  

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