Date: 2021-06-25Category: Not ApplicableState: Union GovernmentCountry: Europe
Commission Implementing Regulation (EU) 2021/1043 of 24 June 2021 on the extension of the transitional provisions related to own funds requirements for exposures to central counterparties set out in Regulation (EU) No 575/2013 of the European Parliament and of the Council (Text with EEA relevance)
Executive Summary:
Commission Implementing Regulation (EU) 2021/1043 extends the transitional period related to own funds requirements for exposures to third-country central counterparties (CCPs) under Regulation (EU) No 575/2013. This extension, applicable from June 29, 2021, is until June 28, 2022. The extension aims to avoid disruption to international financial markets and allows time for the Commission to finalise equivalence assessments and ESMA to recognise third-country CCPs.
Key Points / Main Content:
* **Extension of Transitional Period:**
* Extends the transitional period in Article 497(1)(b)(iii) of Regulation (EU) No 575/2013.
* The new deadline is June 28, 2022.
* **Justification for Extension:**
* Avoids penalising Union institutions with higher own funds requirements.
* Prevents potential market disruption due to institutions withdrawing from or reducing services to CCPs.
* Allows time for the Commission to complete equivalence assessments under Article 25(6) of Regulation (EU) No 648/2012.
* Provides time for ESMA to recognise third-country CCPs.
* **Entry into Force and Application:**
* The regulation came into force on the third day following its publication in the Official Journal of the European Union.
* It applies from June 29, 2021.
Impact Analysis:
* **Credit Institutions and Investment Firms:**
* *Impact:* Institutions established in the Union, or their subsidiaries established outside the Union, having exposures to those third-country CCPs, benefit from continued application of transitional provisions, avoiding significant increases in own funds requirements for exposures to certain third-country CCPs.
* *Action Required:* Monitor the progress of the Commission's equivalence assessments and ESMA's recognition decisions for third-country CCPs. Prepare for potential changes in own funds requirements if equivalence decisions are not adopted by the end of the extended transitional period.
* **European Commission:**
* *Impact:* The Commission is responsible for finalising equivalence assessments for relevant third-country jurisdictions.
* *Action Required:* Expedite the equivalence assessment process under Article 25(6) of Regulation (EU) No 648/2012 and adopt equivalence decisions where conditions are met.
* **European Securities and Markets Authority (ESMA):**
* *Impact:* ESMA is responsible for recognising third-country CCPs.
* *Action Required:* Continue recognition procedures for third-country CCPs awaiting recognition, based on the Commission's equivalence decisions.
* **Third-Country CCPs:**
* *Impact:* CCPs that submitted their application for recognition before June 27, 2019, will continue to be treated as qualifying CCPs by Union institutions during the extended transitional period.
* *Action Required:* Continue to cooperate with ESMA in the recognition process.
Key Entities Referenced
European Union: A political and economic union of member states located primarily in Europe.
European Commission: An executive branch of the European Union responsible for proposing legislation, implementing decisions, upholding the EU treaties and managing the day-to-day business of the EU.
Regulation EU No 575/2013: A regulation of the European Parliament and of the Council on prudential requirements for credit institutions and investment firms.
European Parliament: The directly elected parliamentary body of the European Union.
Council of the European Union: A body composed of government ministers from each EU member state.
Regulation EU No 648/2012: A regulation of the European Parliament and of the Council on OTC derivatives, central counterparties and trade repositories.
European Securities and Markets Authority (ESMA): A European Union financial regulatory agency and European Supervisory Authority.
Brussels: The capital of Belgium, and a major administrative centre for the European Union, where the regulation was adopted.
L 225/52 E N O f f i c i a l J o u r n a l o f t h e E u r o p e a n Union 25.6.2021
COMMISSION IMPLEMENTING REGULATION (EU) 2021/1043
of 24 June 2021
on the extension of the transitional provisions related to own funds requirements for exposures to
central counterparties set out in Regulation (EU) No 575/2013 of the European Parliament and of
the Council
(Text with EEA relevance)
THE EUROPEAN COMMISSION,
Having regard to the Treaty on the Functioning of the European Union,
Having regard to 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(1), and
in particular Article 497(3) thereof,
Whereas:
(1) In order to avoid disruption to international financial markets and to prevent penalising institutions established in
the Union by subjecting them to higher own funds requirements during the processes of recognition of existing
third-country central counterparties (CCPs), Article 497(1) of Regulation (EU) No 575/2013 established a
transitional period during which institutions may treat exposures to those third-country CCPs as exposures to
qualifying CCPs.
(2) For third-country CCPs that submitted their application for recognition in accordance with Article 25(6) of
Regulation (EU) No 648/2012 of the European Parliament and of the Council(2)before 27 June 2019, specifically
all third-country CCPs still awaiting recognition by the European Securities and Markets Authority (ESMA), the
transitional period is set to expire on 28 June 2021.
(3) The Commission has not yet adopted decisions in accordance with Article 25(6) of Regulation (EU) No 648/2012
for some of the jurisdictions in which those third-country CCPs are established. Such decisions are a prerequisite for
ESMA to recognise third-country CCPs. Since those decisions will not be adopted by 28 June 2021, ESMA will not be
able to complete by that date the recognition procedures for the third-country CCPs awaiting recognition.
(4) If the transitional period is not extended, institutions established in the Union, or their subsidiaries established
outside the Union, having exposures to those third-country CCPs, will be required to increase their own funds for
those exposures significantly. This could potentially lead to the withdrawal of those institutions as direct
participants in those CCPs or, at least temporarily, to the cessation of the provision of clearing services to those
institutions’ clients, and thus cause severe disruption in the markets in which those CCPs operate. Therefore, it is
necessary to extend the transitional provision in Article 497(1), point (b)(iii) of Regulation (EU) No 575/2013 by
12 months, until 28 June 2022.
(5) The extension of the transitional provision would leave time for the Commission to finalise its equivalence
assessments in accordance with Article 25(6) of Regulation (EU) No 648/2012 and to adopt equivalence decisions
where conditions thereof are met. It would also leave time for ESMA to recognise the third-country CCPs
concerned. Where a positive equivalence decision would not be adopted by the Commission, an extension would
leave time for institutions to properly prepare for the end of the transitional period provided for in Article 497(1)
of Regulation (EU) No 575/2013.
(6) This Regulation should apply from the first day after the expiry of the existing transitional period.
(7) The measures provided for in this Regulation are in accordance with the opinion of the European Banking
Committee,
(1) OJ L 176, 27.6.2013, p. 1.
(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).25.6.2021 E N O f f i c i a l J o u r n a l o f t h e E u r o p e a n Union L 225/53
HAS ADOPTED THIS REGULATION:
Article 1
The transitional period referred to in Article 497(1), point (b)(iii), of Regulation (EU) No 575/2013 is extended until
28 June 2022.
Article 2
This Regulation shall enter into force on the third day following that of its publication in the Official Journal of the European
Union.
It shall apply from 29 June 2021.
This Regulation shall be binding in its entirety and directly applicable in all Member States.
Done at Brussels, 24 June 2021.
For the Commission
The President
Ursula VON DER LEYEN