Proposal for a DIRECTIVE OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL amending Directives 2009/65/EU, 2013/36/EU and (EU) 2019/2034 as regards the treatment of concentration risk towards central counterparties and the counterparty risk on centrally cleared derivative transactions
Date: 2022-12-07
Institutions: Directorate-General for Financial Stability, Financial Services and Capital Markets Union, European Commission
Subjects: capital market, credit institution, financial control, financial derivative, financial legislation, financial supervision, financial transaction, investment company, private-sector liquidity, securities

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   EUROPEAN COMMISSION  Brussels, 7.12.2022  COM(2022) 698 final 2022/0404 (COD)  Proposal for a DIRECTIVE OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL amending Directives 2009/65/EU, 2013/36/EU and (EU) 2019/2034 as regards the treatment of concentration risk towards central counterparties and the counterparty risk on centrally cleared derivative transactions (Text with EEA relevance) {SEC(2022) 697} - {SWD(2022) 697-698}  
 
EXPLANATORY MEMORANDUM 

1. 

• 

CONTEXT OF THE PROPOSAL 

Reasons for and objectives of the proposal 

This  proposal  is  part  of  the  initiative  aimed  at  ensuring  that  the  EU  has  a  safe,  robust  and 
competitive central clearing ecosystem, thereby promoting the Capital Markets Union (CMU) 
and  reinforcing  the  EU’s  open  strategic  autonomy.  Robust  and  safe  central  counterparties 
(CCPs)  enhance  the  trust  of  the  financial  system  and  crucially  support  the  liquidity  of  key 
markets. A safe, robust and competitive central clearing ecosystem is a pre-condition for it to 
grow further. The EU central clearing ecosystem should enable EU firms to hedge their risks 
efficiently and safely, while at the same time safeguarding the wider financial stability. In this 
way,  central  clearing  will  support  the  EU  economy.  A  competitive  and  efficient  EU  central 
clearing  ecosystem  will  increase  clearing  activities,  but  clearing  also  entails  risks  by 
centralising transactions in a few CCPs being financially systemically important. Hence, those 
risks  must  be  appropriately  managed  by  CCPs  and  CCPs  must  continue  to  be  thoroughly 
supervised both at the national and the wider EU level. 

In addition, since 2017, concerns have been repeatedly expressed about the ongoing risks to 
the EU financial stability arising from the excessive concentration of clearing in some third-
country CCPs, notably in a stress scenario. High-risk but low-probability events can happen, 
and the EU must be prepared to face them1. While EU CCPs have generally proven resilient 
throughout these developments, experience has shown that the EU central clearing ecosystem 
can be made stronger, to the benefit of financial stability. However, open strategic autonomy 
also means that the EU needs to safeguard itself against the financial stability risks which can 
arise when EU market participants are excessively reliant on third-country entities, as this can 
be a source of vulnerabilities. To overcome this situation, the initiative which this proposal is 
part of seeks to increase liquidity at EU CCPs, build up the EU’s central clearing capacity and 
reduce  the  risks  posed  to  the  EU  financial  stability  by  excessive  exposures  to  third-country 
CCPs. Consequently, amongst others, it requires all market participants subject to a clearing 
obligation to hold active accounts at EU CCPs for clearing at least a certain proportion of the 
services  that  have  been  identified  by  ESMA  as  of  substantial  systemic  importance  for  EU 
financial stability. 

Whereas  the  major  part  of  the  legislative  measures  to  enact  this  package  are  situated  in  the 
Commission proposal for a Regulation amending Regulation (EU) No 648/20122 (EMIR), the 
so-called  ‘EMIR  3’  review,  the  current  proposal  holds  modifications  to  Directive 
2013/36/EU3  (Capital  Requirements  Directive  or  ‘CRD’),  Directive  (EU)  2019/20344 

1 
Communication from the Commission to the European Parliament, the Council, the European Central 
Bank,  the  European  Economic  and  Social  Committee  and  the  Committee  Of  The  Regions  “The  European 
economic and financial system: fostering openness, strength and Resilience”, COM(2021) 32.  
2 
derivatives, central counterparties and trade repositories, OJ L 201, 27.7.2012. 
3 
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,  amending  Directive 
2002/87/EC and repealing Directives 2006/48/EC and 2006/49/EC, OJ L 176, 27.6.2013. 

Regulation (EU) No 648/2012 of the European Parliament and of the Council of 4 July 2012 on OTC 

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(Investment  Firms  Directive  or  ‘IFD’)  and  Directive  2009/65/EU5  (Undertakings  for 
Collective  Investment  in  Transferable  Securities  Directive  or  ‘UCITS  Directive’)  which  are 
necessary to ensure that the objectives of the EMIR 3 review are achieved as well as to assure 
coherence. The two proposals should therefore be read in conjunction. 

• 

Consistency with existing policy provisions in the policy area 

The  initiative  which  this  proposal  is  part  of  is  related  to,  and  consistent  with,  other  EU 
policies and ongoing initiatives that aim to (i) promote the Capital Markets Union CMU)6, (ii) 
reinforce the EU’s open strategic autonomy7 and (iii) enhance the efficiency and effectiveness 
of EU-level supervision.  

This proposal introduces limited amendments to CRD and IFD to encourage institutions and 
investment firms respectively, as well as their competent authorities, to systematically address 
any  excessive  concentration  risk  that  may  arise  from  their  exposures  towards  CCPs,  in 
particular those systemically important third-country CCPs (Tier 2 CCPs) that offer services 
determined  by  ESMA  as  being  of  substantial  systemic  importance,  reflecting  the  broader 
policy objective of an 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. Increased central clearing at EU CCPs will also contribute to more 
efficient  post-trade  arrangements  which  are  the  foundations  stones  of  a  robust  CMU.  The 
proposal  also  amends  the  UCITS  Directive  to  eliminate  counterparty  risk  limits  for  all 
derivative  transactions  that  are  centrally  cleared  by  a  CCP  that  is  authorised  or  recognised 
under  Regulation  (EU)  No  648/2012,  thereby  establishing  a  level  playing-field  between 
exchange  traded  and  over-the-counter  (OTC)  derivatives  and  better  reflecting  the  risk 
reducing nature of CCPs in derivative transactions. 

• 

Consistency with other Union policies 

This  initiative  should  be  viewed  within  the  context  of  the  broader  Commission  agenda  to 
make the EU markets safer, more robust, more efficient and competitive as represented by the 
CMU  and  open  strategic  autonomy  initiatives.  Safe,  efficient  and  competitive  post-trade 
arrangements, in particular central clearing, 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. 

4 
Directive (EU) 2019/2034 of the European Parliament and of the Council of 27 November 2019 on the 
prudential  supervision  of  investment  firms  and  amending  Directives  2002/87/EC,  2009/65/EC,  2011/61/EU, 
2013/36/EU, 2014/59/EU and 2014/65/EU, OJ L 314, 5.12.2019. 
5 
Directive  2009/65/EC  of  the  European  Parliament  and  of  the  Council  of  13  July  2009  on  the 
coordination of laws, regulations and administrative provisions relating to undertakings for collective investment 
in transferable securities (UCITS) (recast), OJ L 302, 17.11.2009. 
6 
action plan’, COM(2020) 590. 
7 
strength and resilience’, COM(2021) 32. 

Commission  Communication,  ‘The  European  economic  and  financial  system:  fostering  openness, 

Communication  from  the  Commission,  ‘A  Capital  Markets  Union  for  people  and  businesses  –  New 

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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 Law.8 

2. 

• 

LEGAL BASIS, SUBSIDIARITY AND PROPORTIONALITY 

Legal basis 

CRD,  IFD  and  the  UCITS  Directive  set  out  the  regulatory  and  supervisory  framework  for 
credit institutions, investment firms and UCITS fund respectively, which can make use of the 
services  offered  by  EU  and  third-country  CCPs.  The  legal  basis  for  these  Directives  was 
Article 53(1) of the Treaty of the Functioning of the European Union (TFEU) as they aimed at 
coordinating  the  provisions  concerning  the  taking-up  and  pursuit  of  activities  of  credit 
institutions,  investment  firms  and  UCITS.  Considering  that  this  initiative  proposes  further 
policy actions to ensure the achievement of these objectives, the related legislative proposal 
would be adopted under the same legal basis. 

• 

Subsidiarity (for non-exclusive competence)  

This proposal is part of the legislative package aimed at enhancing the attractiveness of EU 
CCPs  by  facilitating  EU  CCPs’  ability  to  bring  new  products  to  market  and  reducing 
compliance costs as well as strengthening EU-level supervision of EU CCPs. EU action will 
also address the EU’s excessive reliance on Tier 2 third-country CCPs in order to reduce the 
risks  to  EU  financial  stability.  Safe,  robust,  efficient  and  competitive  market  for  central 
clearing  services  contributes to  deeper, more liquid  markets  in the EU and  is essential  for  a 
well-functioning CMU. 

This  proposal  in  particular  amends  CRD  and  IFD  in  order  to  encourage  institutions  and 
investment firms respectively, as well as their competent authorities, to systematically address 
any  excessive  concentration  risk  that  may  arise  from  their  exposures  towards  CCPs,  in 
particular Tier 2 CCPs, and reflect the broader policy objective of a  safer, more  robust and 
competitive  central  clearing  ecosystem  in  the  EU.  The  proposal  also  amends  the  UCITS 
Directive to eliminate counterparty risk limits for all derivative transactions that are centrally 
cleared  by  a  CCP  that  is  authorised  or  recognised  under  Regulation  (EU)  No  648/2012, 
thereby establishing a level playing-field between exchange traded and OTC derivatives and 
better reflecting the risk reducing nature of CCPs in derivative transactions. 

Member  States  and  national  supervisors  cannot  address  on  their  own  the  systemic  risks  of 
highly  integrated  and  interconnected  CCPs  that  operate  on  a  cross-border  basis  beyond  the 
scope  of  national  jurisdictions.  Nor  can  they  mitigate  risks  arising  from  diverging  national 
supervisory practices. Member States also cannot on their own incentivise central clearing in 
the  EU  and  address  the  inefficiencies  of  the  framework  for  the  cooperation  of  national 
supervisors and EU authorities. Therefore, by reason of the scale of actions, these objectives 

8 
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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can be better achieved at EU level in accordance with the principle of subsidiarity as set out in 
Article 5 of the Treaty on European Union. 

• 

Proportionality 

This proposal introduces limited changes to CRD, IFD and the UCITS Directive to encourage 
clearing at EU CCPs. The proposal takes full account of the principle of proportionality, being 
adequate  to  reach  the  objectives  and  not  going  beyond  what  is  necessary  in  doing  so.  It  is 
compatible with the proportionality principle, taking into account the right balance of public 
interest at stake and the cost-efficiency of the measures proposed. The proportionality of the 
preferred policy options is further assessed in Chapters 7 and 8 of the accompanying Impact 
Assessment. 

• 

Choice of the instrument 

CRD,  IFD  and  the  UCITS  Directive  are  Directives  and  thus  they  need  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 

The Commission services consulted extensively, engaging with a broad range of stakeholders, 
including  EU  bodies  (ECB,  European  Systemic  Risk  Board  (ESRB),  European  Supervisory 
Authorities  (ESAs)),  Member  States,  members  of  the  European  Parliament’s  Economic  and 
Monetary Affairs Committee, the financial services sector (banks, pension funds, investment 
funds,  insurance  companies,  etc.)  as  well  as  non-financial  corporates  to  evaluate  whether 
EMIR sufficiently ensures EU financial stability. This process showed that there are ongoing 
risks  to  EU  financial  stability  due  to  the  excessive  concentration  of  clearing  in  a  few  third-
country CCPs. These risks are particularly relevant in a stress scenario.  

Nonetheless, considering the relatively recent entry into force of EMIR 2.2 and the fact that 
some requirements do not apply yet,9 the Commission services did not consider it appropriate 
to  prepare  a  full  back-to-back  evaluation  of  the  entire  framework.  Instead,  key  areas  were 
identified  upfront  based  on  stakeholder  input  and  internal  analysis  (relevant  elements  are 
explained 
inefficiencies  and 
ineffectiveness  of  the  current  rules  in  the  problem  definition  section  (Section  3  of  the 
accompanying  Impact  Assessment  on  the  problem  definition  explains  in  detail  the 
inefficiencies and ineffectiveness of the current rules).  

impact  assessment,  highlighting 

in  detail 

the 

the 

in 

• 

Stakeholder consultations 

The Commission has consulted stakeholders throughout the process of preparing the initiative 
for the EMIR review, which this proposal accompanies. In particular through: 

 

a Commission targeted consultation between 8 February and 22 March 2022.10 It was 
decided that the consultation should be targeted as the questions focused  on a very 

9 
For  example,  the  regulatory  technical  standards  (RTS)  on  the  procedures  for  the  approval  of  an 
extension of services or the approval of changes to risk models under Articles 15 and 49 of EMIR  respectively 
have not been adopted yet. 
10 
https://ec.europa.eu/info/business-economy-euro/banking-and-finance/regulatory-process-financial-
services/consultations-banking-and-finance/targeted-consultation-review-central-clearing-framework-eu_en  

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specific  and  rather  technical  area.  71  stakeholders  responded  to  the  targeted 
consultation  via  the  online  form  while  some  confidential  responses  were  also 
submitted via email; 

a Commission Call for Evidence between 8 February and 8 March 202211; 

consultations  of  stakeholders  through  the  Working  Group  on  the  opportunities  and 
challenges of transferring derivatives from the United Kingdom to the EU, in the first 
half of 2021 including several stakeholder outreach meetings in February, March and 
June 2021; 

meeting  with  Members  of  the  European  Parliament  on  4  May  as  well  as  bilateral 
meetings subsequently; 

meeting  with  Member  States’  experts  on  30  March  2022,  16  June  2022  and  8 
November 2022;  

meetings of the Financial Services Committee on 2 February and 16 March 2022; 

meetings  of  the  Economic  and  Financial  Committee  on  18  February  and  29  March 
2022; 

bilateral  meetings  with  stakeholders  as  well  as  confidential  information  received 
from a wide range of stakeholders. 

 

 

 

 

 

 

 

The main messages of this consultative process were: 

 

 

 

 

 

 

Work starting in 2021 showed that improving the attractiveness  of  central  clearing, 
encouraging 
the  supervisory 
arrangements in the EU will take time.  

the  development  of  EU 

infrastructures,  and 

A  variety  of  measures  was  identified  that  could  help  improve  the  attractiveness  of 
EU CCPs  and clearing  activities as well  as  ensure that their risks  are appropriately 
managed and supervised. 

These measures are not only in the remit of the Commission and co-legislators, but 
also  could  potentially  require  actions  from  the  ECB,  national  central  banks,  ESAs, 
national supervisory authorities, CCPs and banks.  

The  consultation  showed  that  market  participants  generally  prefer  a  market  driven 
approach to regulatory measures, to minimise costs and for EU market participants to 
remain competitive internationally. 

Nevertheless,  regulatory  measures  were  supported  to  a  certain  extent,  especially 
when allowing for a faster approval process for CCPs’ new products and services12. 

Measures  deemed useful to  enhance EU CCP’s attractiveness  were:  maintaining an 
active  account  with  an  EU  CCP,  measures  to  facilitate  expanding  services  by  EU 
CCPs,  broadening  the  scope  of  clearing  participants,  amending  hedge  accounting 
rules and enhancing funding and liquidity management conditions for EU CCPs. 

The initiative comprises of two legislative proposals that take this stakeholder feedback into 
account,  as  well  as  the  feedback  received  through  meetings  with  a  broad  range  of 

https://ec.europa.eu/info/law/better-regulation/have-your-say/initiatives/13378-Derivatives-clearing-

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Rather no/limited support regarding higher capital requirements in the CRR for exposures to Tier 2 non- 
EU CCPs , exposure reduction targets toward specific Tier 2 non- EU CCPs, an obligation to clear in the EU and 
macroprudential tools. 

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stakeholders, EU authorities and institutions. It introduces targeted amendments to EMIR, the 
Capital  Requirements  Regulation,  the  Money  Market  Funds  Regulation,  CRD,  IFD  and  the 
UCITS Directive aimed at:  

(a) 

Improving  the  attractiveness  of  EU  CCPs  by  simplifying  the  procedures  for 
launching  products  and  changing  models  and  parameters  and  introducing  a 
non-objections  approval/ex-post  approval/review  for  certain  changes.  This 
allows EU CCPs to introduce new products and model changes more quickly 
while  ensuring  adequate  risk  considerations  are  upheld  and  without 
endangering  financial  stability  and 
therefore  making  EU  CCPs  more 
competitive; 

(b)  Encouraging  central  clearing  in  the  EU  to  safeguard  financial  stability  by 
requiring clearing members and clients to hold, directly or indirectly, an active 
account at EU CCPs, and facilitating clearing by clients will help to reduce the 
exposure to, and with it excessive reliance on, Tier 2 third-country CCPs which 
is a risk to the financial stability of the EU;  

(c)  Enhancing the assessment and management of cross-border risk: ensuring that 
authorities in the EU have adequate powers and information to monitor risks in 
relation  to  both  EU  and  third-country  CCPs,  including  by  enhancing  their 
supervisory cooperation within the EU. 

• 

Collection and use of expertise 

In  preparing  this  proposal,  the  Commission  relied  on  the  following  external  expertise  and 
data,  including  from  ESMA,  the  ESRB  and  financial  market  participants,  as  presented  in 
detail in the EMIR 3 review proposal which this proposal accompanies.   

• 

Impact assessment 

The  Regulatory  Scrutiny  Board  reviewed  the  impact  assessment  for  the  legislative  package 
this  proposal  is  part  of.  The  impact  assessment  report,  which  is  described  in  detail  in  the 
EMIR 3 review proposal, which this proposal accompanies, received a positive opinion with 
reservations from the Regulatory Scrutiny Board on 14 September 2022.  

• 

Regulatory fitness and simplification 

The initiative aims to enhance the attractiveness of EU CCPs, reduce the excessive reliance of 
EU  market  participants  on  Tier  2  CCPs,  safeguard  EU  financial  stability  and  enhance  the 
EU’s  open  strategic  autonomy.  As  such,  and  in  particular  the  proposal  for  this  Directive 
amending CRD, IFD and the UCITS Directive, does not aim at reducing costs per se. 

• 

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 respects these rights, 
in particular the economic rights, as listed in the main United Nations conventions on human 
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.  

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4. 

BUDGETARY IMPLICATIONS 

The proposal for a Directive amending CRD, IFD and the UCITS Directive will not have any 
impact on the budget of the EU neither does the proposal reviewing EMIR that this proposal 
complements, as explained in Section 8.2.5. of the impact assessment.  

5. 

• 

OTHER ELEMENTS 

Implementation plans and monitoring, evaluation and reporting arrangements 

The  amendments  are  tightly  interlinked  with  the  EMIR  3  review.  Arrangements  should 
therefore  be  considered  in  conjunction  with  those  envisaged  under  that  proposal.  The  Joint 
Monitoring Mechanism will collect the necessary data for the monitoring of the key metrics 
(use of active accounts, number of active accounts, proportion of transactions cleared through 
active accounts, volume and excessive concentration of exposures towards different types of 
CCPs). This will allow for the future evaluation of the new policy tools. Regular Supervisory 
Review and Evaluation Process (SREP) and stress testing exercises will also help monitoring 
the  impact  of  the  new  proposed  measures  on  affected  institutions  and  investment  firms.  In 
particular,  this  will  allow  the  assessment  of  the  adequacy  and  proportionality  of  such 
measures in the case of smaller institutions and investment firms. 

• 

Explanatory documents (for directives) 

The proposal does not require explanatory documents in relation to its transposition.  

• 

Detailed explanation of the specific provisions of the proposal 

While  UCITS  are  allowed  to  invest  in  both  OTC  and  exchange  traded  derivatives,  the 
provisions  of  Article  52  of  the  UCITS  Directive  imposed  regulatory  limits  on  counterparty 
risk  only  to  OTC  derivative  transactions,  irrespective  of  whether  the  derivatives  were 
centrally cleared. To ensure alignment with Regulation (EU) No 648/2012, to establish a level 
playing-field  between  exchange  traded  and  OTC  derivatives  and  to  better  reflect  the  risk 
reducing  nature  of  CCPs  in  derivative  transactions,  Article  3(2)  of  this  Directive  amends 
Article  52  of  the  UCITS  Directive  to  eliminate  counterparty  risk  limits  for  all  derivative 
transactions  that  are  centrally  cleared  by  a  CCP  that  is  authorised  or  recognised  under 
Regulation  (EU)  No  648/2012.  To  introduce  the  notion  of  CCP  in  the  UCITS  Directive, 
Article  3(1)  of  this  Directive  amends  Article  2(1)  of  the  UCTIS  Directive  to  include  the 
definition of CCP by cross-referring to its definition in Regulation (EU) No 648/2012. 

This  Directive  introduces  new  provisions  and  proposes  amendments  to  several  articles  in 
Directive  2013/36/EU  (the  Capital  Requirements  Directive  or  CRD)  and  in  Directive  (EU) 
2019/2034  (the  Investment  Firms  Directive  or  IFD)  in  order  encourage  institutions  and 
investment  firms,  respectively,  as  well  as  their  competent  authorities,  to  systematically 
address  any  excessive concentration  risk that may  arise from their exposures  towards CCPs 
and  reflect  the  broader  policy  objective  of  a  safer,  more  robust,  efficient  and  competitive 
market for EU central clearing services. 

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Article  81  of  the  CRD,  in  conjunction  with  Article  104  of  the  CRD,  could  already  be  used 
under the current framework to address excessive concentration of exposures towards CCPs.  

However,  the  proposed  amendments  introduce  more  focus  under  the  CRD  on  an  adequate 
management  of  exposures  towards  CCPs,  thus  supporting  the  transition  to  a  safer,  more 
robust, efficient and competitive market for EU central clearing services. They also create the 
necessary  framework  in  the  context  of  the  IFD.  In  this  context,  competent  authorities  are 
encouraged  to  review  the  alignment  of  credit  institutions  and  investment  firms  with  the 
relevant  Union  policy  objectives  or  broader  transition  trends  relating  to  the  use  of  active 
account  structure  under  EMIR  over  the  short,  medium  and  long  term,  thereby  enabling 
competent  authorities  to  address  financial  stability  concerns  that  could  arise  from  the 
excessive reliance on certain systemically important third-country CCPs (Tier 2 CCPs). 

Article  1(1)  and  (2)  of  this  Directive  amend  Articles  74  and  76  of  the  CRD  to  require 
institutions to include concentration risk arising from  exposures towards CCPs, in particular 
those offering services of substantial systemic importance for the Union or one or more of its 
Member States, in institutions’ strategies and processes for evaluating internal capital needs as 
well as adequate internal governance. A request for the management body to develop concrete 
plans to address such concentration risks is also introduced in Article 76 of the CRD. Article 
2(1)  and  (2)  propose  similar  amendments  to  Articles  26  and  29  of  the  IFD  for  investment 
firms. 

To  support  the  supervisory  review  and  evaluation  process  (SREP),  Article  1(3)  of  this 
Directive amends Article 81 of the CRD to introduce a requirement for competent authorities 
to specifically assess and monitor institutions’ practices concerning the management of their 
concentration  risk  arising  from  exposures  towards  central  counterparties  as  well  as  the 
progress  made  by  institutions  in  adapting  to  the  relevant  policy  objectives  of  the  Union.  A 
similar  requirement  is  introduced  in  Article  36  of  the  IFD  for  investment  firms  via  Article 
2(3) of this Directive. 

Article  1(4)  of  this  Directive  amends  Article  100  of  the  CRD  mandating  the  EBA  to  issue 
guidelines  on  the  uniform  inclusion  of  concentration  risk  arising  from  exposures  towards 
central counterparties in the supervisory stress testing. 

Article 1(5) of this Directive amends Article 104 of the CRD to facilitate the possibility for 
competent authorities to  address specifically the concentration risk arising from institutions’ 
exposures  towards  CCPs,  by  adding  a  concrete  supervisory  power  to  address  such  risk. 
Similar provisions are added in the context of Article 39 of the IFD for investment firms via 
Article 2(4) of this Directive. 

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2022/0404 (COD) 

Proposal for a 

DIRECTIVE OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL 

amending Directives 2009/65/EU, 2013/36/EU and (EU) 2019/2034 as regards the 
treatment of concentration risk towards central counterparties and the counterparty 
risk on centrally cleared derivative transactions 

(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 53(1) 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 Bank (1), 

Acting in accordance with the ordinary legislative procedure (2), 

Whereas: 

(1) 

(2) 

To  ensure  consistency  with  Regulation  (EU)  No  648/2012  and  to  ensure  the  proper 
functioning of the internal market, it is necessary to lay down in Directive 2009/65/EU 
a uniform set of rules to address counterparty risk in derivative transactions performed 
by undertakings for collective investment in transferable securities (UCITS), where the 
transactions  have  been  cleared  by  a  CCP  that  is  authorised  or  recognised  under  that 
Regulation. Directive 2009/65/EU imposes regulatory limits on counterparty risk only 
to  OTC  derivative  transactions,  irrespective  of  whether  the  derivatives  have  been 
centrally  cleared.  As  central  clearing  arrangements  mitigate  counterparty  risk  that  is 
inherent  in  derivative  contracts,  it  is  necessary  to  take  into  consideration  whether  a 
derivative has been centrally cleared by a CCP that is authorised or recognised under 
that  Regulation  and  to  establish  a  level  playing-field  between  exchange  traded  and 
OTC  derivatives,  when  determining  the  applicable  counterparty  risk  limits.  It  is  also 
necessary  for  regulatory  and  harmonisation  purposes,  to  lift  counterparty  risk  limits 
only  when  the  counterparties  use  CCPs  that  are  authorised  in  a  Member  State  or 
recognised,  in  accordance  with  Regulation  (EU)  No  648/2012,  to  provide  clearing 
services to clearing members and their clients. 

To  contribute  to  the  objectives  of  the  Capital  Markets  Union  it  is  necessary,  for  the 
efficient use of CCPs, to address certain impediments to the use of central clearing in 
Directive  2009/65/EU  and  to  provide  clarifications  in  Directives  2013/36/EU,  and 
(EU) 2019/2034. The excessive reliance of the Union financial system on systemically 
important  third-country  CCPs  (Tier  2  CCPs)  could  pose  financial  stability  concerns 
that needs to be addressed appropriately. To ensure the financial stability in the Union 
and adequately mitigate potential risks of contagion across the Union financial system, 
appropriate  measures  should  therefore  be  introduced  to  foster  the  identification, 

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management  and  monitoring  of  concentration  risk  arising  from  exposures  towards 
CCPs. In that context, Directives 2013/36/EU and (EU) 2019/2034 should be amended 
to  encourage  institutions  and  investment  firms  to  take  the  necessary  steps  to  adapt 
their business model to ensure the consistency with the new requirements for clearing 
introduced  by  the  revision  of  Regulation  (EU)  No  648/2012  and  to  overall  enhance 
their risk management practices, also considering the nature, scope and complexity of 
their  market  activities.  Whilst  competent  authorities  can  already  impose  additional 
own funds requirements for risks that are not or not adequately covered by the existing 
capital  requirements,  they  should  be  better  equipped  with  additional,  more  granular, 
tools and powers under the Pillar 2 to enable them to take suitable and decisive actions 
based on the conclusions of their supervisory assessments. 

Directives  2009/65/EU,  2013/36/EU  and  (EU)  2019/2034  should  therefore  be 
amended accordingly.  

Since  the  objectives  of  this  Directive,  namely  ensuring  that  credit  institutions, 
investment firms and their competent authorities adequately monitor and mitigate the 
concentration risk arising from exposures towards Tier 2 CCPs which offer services of 
substantial systemic importance and eliminating counterparty risk limits for derivative 
transactions that are centrally cleared by a CCP authorised or recognised in accordance 
with  Regulation  (EU)  No  648/2012  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  Directive  does  not  go 
beyond what is necessary in order to achieve those objectives, 

(3) 

(4) 

HAVE ADOPTED THIS DIRECTIVE: 

Article 1 

Amendments to Directive 2009/65/EC  

Directive 2009/65/EC is amended as follows: 

(1) 

in Article 2(1), the following point (u) is added: 

‘(u)  ‘central counterparty’ (‘CCP’) means a CCP as defined in Article 2, point (1), of 

Regulation (EU) No 648/2012 of the European Parliament and of the Council*2. 

___________ 

*2 

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).’; 

(2)  Article 52 is amended as follows: 

(a) 

in paragraph 1, second subparagraph, the introductory wording is replaced by the 
following: 

‘The risk exposure to a counterparty of the UCITS in a derivative transaction that 
is not centrally cleared through a CCP authorised in accordance with Article 14 of 

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Regulation (EU) No 648/2012 or recognised in accordance with Article 25 of that 
Regulation, shall not exceed either:’; 

(b)  paragraph 2 is amended as follows” 

(i) 

the first subparagraph is replaced by the following: 

‘Member States may raise the 5 % limit laid down in the first subparagraph 
of paragraph 1to a maximum of 10 %. If they do so, however, the total value 
of the transferable securities and the money market instruments held by the 
UCITS in the issuing bodies in each of which it invests more than 5 % of its 
assets shall not exceed 40 % of the value of its assets. That limitation shall 
not  apply  to  deposits  or  derivative  transactions  made  with  financial 
institutions subject to prudential supervision.’; 

(ii) 

in the second subparagraph, point (c) is replaced by the following: 

‘(c)  exposures  arising  from  derivative  transactions  that  are  not  centrally 
cleared  through  a  CCP  authorised  in  accordance  with  Article  14  of 
Regulation (EU) No 648/2012 or recognised in accordance with Article 25 
of that Regulation, undertaken with that body.’. 

Article 2 

Amendments to Directive 2013/36/EU  

Directive 2013/36/EU is amended as follows:  

(1) 

in Article 74(1), [point (b)] is replaced by the following: 

“[(b)] effective processes to identify, manage, monitor and report the risks they are or might 
be  exposed  to  in  the  short,  medium  and  long  term  time  horizon,  including  environmental, 
social  and  governance  risks,  as  well  as  concentration  risk  arising  from  exposures  towards 
central  counterparties, taking into account  the conditions  set  out in  Article 7a of Regulation 
(EU) No 648/2012 of the European Parliament and of the Council*1,;” 

___________ 

*1 

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)..’; 

(2) 

in Article 76(2), the following subparagraph is added: 

‘Member  States  shall  ensure  that  the  management  body  develops  specific  plans  and 
quantifiable  targets  in  accordance  with  the  proportions  set  out  in  accordance  with 
Article  7a  of  Regulation  (EU)  No  648/2012  to  monitor  and  address  the  concentration 
risk  arising  from  exposures  towards  central  counterparties  offering  services  of 
substantial systemic importance for the Union or one or more of its Member States.’; 

(3) 

in Article 81, the following paragraph is added: 

‘Competent authorities shall assess and monitor developments of institutions’ practices 
concerning the management of their concentration risk arising from exposures towards 
central counterparties, including the plans developed in accordance with Article 76(2) of 
this Directive, as well as the progress made in adapting the institutions’ business models 

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to the relevant policy objectives of the Union, taking into account the requirements set 
out in Article 7a of Regulation (EU) No 648/2012’; 

 (4) 

in Article 100, the following paragraph [5] is added: 

‘[5].  EBA,  in  accordance  with  Article  16  of  Regulation  (EU)  No  1093/2010,  in 
coordination  with  ESMA,  in  accordance  with  Article  16  of  Regulation  (EU)  No 
1095/2010, shall develop guidelines to ensure a consistent methodology for integrating 
the  concentration  risk  arising  from  exposures  towards  central  counterparties  in  the 
supervisory stress testing.”; 

(5)  Article 104, (1) is amended as follows: 

(a) 

the introductory wording is replaced by the following: 

‘For the purposes of Article 97, Article 98(1), point (b), Article 98(4), (5) and (9), 
Article  101(4)  and  Article  102  of  this  Directive  and  of  the  application  of 
Regulation (EU) No 575/2013, competent authorities shall have at least the power 
to:’; 

(b) 

the following point [(n)] is added: 

‘[(n)] require institutions to reduce exposures towards a central counterparty or to 
realign exposures across their clearing accounts in accordance with Article 7a of 
Regulation  (EU)  No  648/2012,  where  the  competent  authority  considers  there  is 
excessive concentration risk towards that central counterparty.’; 

Article 3 

Amendments to Directive (EU) 2019/2034 

Directive (EU) 2019/2034 is amended as follows: 

(1) 

in Article 26(1), point (b) is replaced by the following: 

“(b) effective processes to identify, manage, monitor and report the risks that investment firms 
are  or  might  be  exposed  to,  or  the  risks  that  they  pose  or  might  pose  to  others,  including 
concentration risk arising from exposures towards central counterparties, taking into account 
the conditions set out in Article 7a of Regulation (EU) No 648/2012.” 

 (2)  Article 29 (1) is amended as follows: 

(a) 

the following point (e) is added: 

‘(e)  material  sources  and  effects  of  concentration  risk  arising  from  exposures 
towards central counterparties and any material impact on own funds.’; 

(b) 

the following subparagraph is added: 

‘For the purpose of the first subparagraph, point (e), Member States shall ensure 
that  the  management  body  develops  specific  plans  and  quantifiable  targets  in 
accordance  with  the  proportions  set  out  in  accordance  with  Article  7a  of 
Regulation  (EU)  No  648/2012  to  monitor  and  address  the  concentration  risk 
arising  from  exposures  towards  central  counterparties  offering  services  of 
substantial  systemic  importance  for  the  Union  or  one  or  more  of  its  Member 
States.”; 

(3) 

in Article 36(1), the following subparagraph is added: 

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‘For the purpose of the first subparagraph, point (a), competent authorities shall assess 
and  monitor  developments  of  investment  firms’  practices  concerning  the  management 
of  their  concentration  risk  arising  from  exposures  towards  central  counterparties, 
including  the  plans  developed  in  accordance  with  Article  29(1),  point  (e),  of  this 
Directive  as  well  as  the  progress  made  in  adapting  the  investment  firms’  business 
models  to  the  relevant  policy  objectives  of  the  Union,  taking  into  account  the 
requirements set out in Article 7a of Regulation (EU) No 648/2012.’; 

(4)   Article 39(2) is amended as follows: 

(a) 

 the introductory wording is replaced by the following: 

‘For the purposes of Article 29, point (e), Article 36, Article 37(3) and Article 39 
of  this  Directive  and  of  the  application  of  Regulation  (EU)  No  575/2013, 
competent authorities shall have at least the power to:’; 

(b) 

the following point (n) is added: 

‘(n)  require institutions to reduce exposures towards a central counterparty or to 
realign exposures across their clearing accounts in accordance with Article 
7a  of  Regulation  (EU)  No  648/2012,  where  the  competent  authority 
considers  there  is  excessive  concentration  risk  towards  that  central 
counterparty.’; 

Article 4 

Transposition 

1.  Member States shall bring into force the laws, regulations and administrative provisions 
necessary to comply with this Directive by … [PO: please insert the date = 12 months after 
the date of entry into force of the EMIR Review Regulation] at the latest. They shall forthwith 
communicate to the Commission the text of those provisions. 

When Member States adopt those provisions, they shall contain a reference to this Directive 
or be accompanied by such a reference on the occasion of their official publication. Member 
States shall determine how such reference is to be made.  

2.  Member States shall communicate to the Commission the text of the main provisions of 
national law which they adopt in the field covered by this Directive. 

Article 5 

Entry into force 

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

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Article 6 

Addressees 

This Directive is addressed to Member States. 

Done at Brussels, 

For the Commission 
The President 
Ursula VON DER LEYEN 

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