benoit cœure : the international regulatory agenda on ccp links speech by mr benoit cœure, member of the executive board of the european central bank, at the european systemic risk board ( esrb ) workshop on ccp interoperability arrangements, frankfurt am main, 2 november 2015. * * * ladies and gentlemen, i would like to thank the european systemic risk board for inviting me to speak on such an important topic. central counterparty ( ccp ) interoperability is a relatively new development in the european clearing landscape – the first interoperability arrangements between two european ccps were only established in the early 2000s, covering transactions on government bonds and equities. nonetheless, europe has been at the forefront of the global debate on interoperability arrangements and is beginning to reap the benefits of the knowledge it has built up so far 1. ccp interoperability has undoubtedly improved the efficiency of the eu post - trading infrastructure. however, it is also fair to say that industry participants and regulators are facing a number of ongoing questions regarding the full implications of ccp interoperability in terms of competition, financial innovation and systemic risk. in this address, i will try to give an overview of the main benefits that ccp interoperability has brought to the eu financial system, and outline why in my view interoperability should be supported and enhanced. i will also discuss some of the challenges ccps and authorities are currently facing in establishing and managing safe interoperability arrangements. lastly, i will raise a number of questions, which i believe are important to the implementation of ccp interoperability going forward and which could warrant a place on the international regulatory agenda. ccp interoperability has improved the efficiency of the eu post - trading landscape, and is one aspect of broader initiatives to reduce fragmentation in financial markets first of all, i would like to say that it is rather topical to be discussing ccp interoperability, particularly as just a few weeks ago the commission released its action plan on building a capital markets union. one of the priorities put forward by the commission for this ambitious project is to step up efforts in removing barriers to the cross - border clearing and settlement of securities. ccp interoperability can play a key role in meeting this objective, as the giovannini group highlighted in 2001 already. in fact, it is thanks to the work of this group that some barriers were removed and links started being established. 2 indeed, supporting ccp interoper

the necessary steps to make these models compatible with each other. authorities also have a key role in making sure interoperating ccps have comprehensively assessed the risks they pose to each other. as an example, ccps which enter into an interoperability arrangement must collect and exchange margins to cover their reciprocal exposures. under eu rules, these resources are not part of the ccps ’ regular default waterfalls, and are exclusively provided for the purpose of covering losses from one interoperating ccp going into default. in other words, they cannot be used to cover other types of losses, such as a participant default. authorities must ensure that the resources contributed by one ccp are fully protected from potential defaults or stress events which could occur in the other ccp ( s ). while i believe the current european regulatory framework achieves a high degree of protection, it could be further improved by reducing the scope for regulatory interpretation, and by making sure that the same outcomes are achieved by all regulators and supervisors when dealing with interoperability arrangements. at present, the requirements related to ccp interoperability set out in emir level 1 and in the dedicated esma guidance leave room for some degree of interpretation by competent authorities. more granular rules may need to be defined in emir so as to address some of these issues and provide greater clarity to supervisors and regulators. authorities could work together to identify such potential issues, and discuss whether and how additional guidance should be incorporated into emir. allow me to share two examples of areas where the need bis central bankers ’ speeches for more rules could be explored : first, the criteria and requirements for harmonising the risk models of interoperable ccps ; and second, the treatment of exposures resulting from interoperability within ccp stress testing frameworks. while a degree of clarification may be beneficial, we should also recognise that regulation probably cannot address all issues related to such a complex subject as ccp interoperability, and that competent authorities will need to continue playing a role in deciding how best to tackle certain issues not entirely dealt with under the legislation. looking ahead, i believe that market confidence in the safety of interoperability arrangements will be further strengthened with the entry into force of the cpmi - iosco public quantitative disclosure standards for central counterparties. starting in january 2016, all ccps with interoperability arrangements will be required to publish data on the volume of activity cleared through these links. they will also have to publish data on the