benoit cœure : european ccps after brexit speech by mr benoit cœure, member of the executive board of the european central bank, at the global financial markets association, frankfurt am main, 20 june 2017. * * * thank you for inviting me here today. in my short remarks i would like to say a few words about a topic that has received much attention lately : central clearing, and its importance for central banks in the context of brexit. the extensive coverage of central counterparty ( ccp ) clearing in the press and other media these days shows how critical these infrastructures have become since the financial crisis. it is easy to see why ccps have become so important for financial stability. they helped fix a major defect in our financial system, namely the reliance on, and associated counterparty risk of, opaque bilateral over - the - counter trading of derivatives. in our highly interconnected markets, ccps have thus become effective vehicles for reducing systemic risk in our financial system. and in doing so, they play a key part in ensuring that central banks are in a position to pursue their primary objective : price stability. our challenge today is to ensure that ccps do not themselves become a risk to financial stability and, hence, generate potential impediments to the transmission of monetary policy. ccps have grown in scale and scope to the extent that a disruption affecting a major ccp would have a significant impact on banks, markets and the instruments we rely on to perform our core central banking activities. 1 for example, many of our key monetary policy counterparties in the euro area are participants in ccps around the world, and are thus directly exposed to potential strains in centrally cleared markets. asset classes such as repos, which play a direct role in our monetary policy operations, are increasingly being cleared through ccps. any closure of certain repo market segments due to a ccp failure would therefore inevitably limit our ability to align money market conditions with our monetary policy intentions. moreover, financial stress resulting from a struggling ccp could have a knock - on effect on the smooth operation of payment systems, with obvious and probably serious consequences for the real economy. in a severe crisis, we might even be expected to extend emergency lending to a failing ccp or to its participants although this would only be done at our own discretion : an automatic right to central bank liquidity could create serious moral hazard concerns. 2 in short, the safety and soundness of ccps matters

in securities and derivatives markets. according to our estimates, uk ccps clear approximately 90 % of the euro - denominated interest rate swaps of euro area banks, and 40 % of their euro - denominated credit default swaps. 6 these figures should give you a sense of how relevant these ccps are for the stability of the euro. over the years, we have concluded cooperative arrangements with the uk authorities that ensure we are appropriately involved in monitoring and assessing the risk management practices of these entities. these arrangements, which are based on both eu law under the scrutiny of the eu court of justice and on a dedicated memorandum of understanding between the ecb and the bank of england, give us the confidence that in a serious crisis we would have timely access to all the information needed to take action. what concerns us today in the context of brexit is that the current eu regime regarding thirdcountry ccps was never designed to cope with major systemic ccps operating from outside the eu. indeed, this regime relies to a large extent on local supervision, and provides eu authorities with very limited tools for obtaining information and taking action in the event of a crisis. reviewing this regime has therefore become urgent in the current environment. we need to ensure we can preserve a framework that ensures the safety and stability of the financial system when the uk is no longer a member of the eu. in this regard, we think the recent european commission proposals to amend emir are a step in the right direction. if adopted, they would provide the supervisors and the relevant central banks of issue with the guarantees they need in order to monitor and address risks to the eu ’ s financial system. i therefore welcome the fact that the commission has referred to the role that we should play as central bank of issue : we certainly need to play a strong role here, using all the instruments required to exercise our cbi competence. it is also worth noting that most of the proposals presented by the commission merely replicate the approaches already followed by many other major jurisdictions. in that sense, they should seem familiar to authorities and lawmakers on other continents. we are aware that brexit is a cause for concern in the future regulatory treatment of central clearing. in this regard, we know that there has been significant focus on one aspect of the recent commission proposal, namely the ability of the commission to deny recognition to a ccp that poses excessive risks to the financial stability of the eu, and to require it to establish itself in the eu