15 Financial services: central securities
depositories and securities settlement
| (34237)
13821/12
—
| ECB Opinion on a proposal for a regulation on improving securities settlement in the European Union and on central securities depositories
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| Legal base | —
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| Deposited in Parliament | 20 September 2012
|
| Department | HM Treasury
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| Basis of consideration | EM of 30 September 2012
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| Previous Committee Report | None
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| Discussion in Council | Not known
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| Committee's assessment | Politically important
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| Committee's decision | Not cleared, further information requested
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BACKGROUND
15.1 The Commission has been proposing a package of legislative
reforms to strengthen the EU post-trade financial market infrastructure
and to address barriers to the creation of a truly competitive
single market in post-trade financial services. This includes
the Markets in Financial Instruments Directive (MiFID) for trading
venues/exchanges and the Emerging Markets Infrastructure Regulation
(EMIR) for central clearing counterparties (CCP). Securities
settlement concerns the delivery of securities between a buyer
and a seller in order to settle a trade agreed between two counterparties,
typically on an exchange and sometimes after being cleared by
a CCP. Central Securities Depositories (CSDs) are systemically
important financial market infrastructures that support the settlement
of securities.
15.2 In March the Commission presented a draft Regulation
on CSDs and securities settlement with the aim of increasing the
safety and efficiency of cross border transactions and ensuring
a level playing field for CSDs by establishing the core and ancillary
services that a CSD can provide, establishing new common rules
for the authorisation and ongoing supervision of CSDs, setting
prudential, technical, legal and organisational requirements for
the operation of CSDs and their services and harmonising securities
settlement rules.
15.3 We have considered this proposal twice, hearing that
the Government supports the general aims of the Commission's proposals
to ensure the robustness and efficiency of CSDs as systemically
important financial infrastructure, to create a competitive single
market in post-trade financial market services and to increase
the safety and efficiency of securities settlement. We have kept
the draft Regulation under scrutiny pending information from the
Government on developments in Council working group negotiations
on a number of points it has drawn to our attention.[64]
THE DOCUMENT
15.4 In this Opinion the European Central Bank (ECB) opinion
sets out its view on the Commission's draft Regulation on CSDs
and securities settlement and suggests various amendments. The
ECB strongly supports the Commission's proposal which it believes
will strengthen the regulatory framework for CSDs, support cross
border securities settlement, and support its planned TARGET2
Securities (T2S) securities settlement engine.[65]
The Bank makes various minor and technical comments, the more
notable of which include:
- the European Systemic Risk Board being informed of emergency
situations and being consulted on CSDs providing banking services;
and
- new provisions on professional secrecy and the
exchange of information similar to those in the EMIR.
15.5 Beyond the scope of the draft Regulation,
the ECB says that it considers that it is necessary for Member
States' existing legal frameworks for the holding and disposition
of securities and the exercise of rights attached to securities
to be harmonised — the Commission plans to publish a proposal
on securities law legislation covering this area around the end
of this year. The ECB also recommends a comprehensive resolution
regime for CSDs, which is not included in the draft Regulation
— the Commission is due to publish a consultation on a possible
recovery and resolution framework for financial institutions other
than banks, which will cover CSDs.
THE
GOVERNMENT'S
VIEW
15.6 The Financial Secretary to the Treasury
(Greg Clark), reminding us that the Government supports the general
aims of the Commission's draft Regulation and noting that the
ECB's Opinion is broadly consistent with the Government's position,
says that:
- the Government supports cooperative
arrangements for the authorisation and supervision of CSDs involving
other national authorities and the European System of Central
Banks;
- it supports a more comprehensive assessment considering
what ancillary banking services CSDs should provide;
- it has sought to work with the Council to improve
the Commission's conflicts of law provisions to ensure it is clear
which law governs the resolution of disputes concerning the holding,
transfer, and exercising of rights attached to cross border securities;
and
- it has published a consultation (Financial Sector
Resolution: Broadening the Regime),[66]
which included a potential resolution regime for CSDs.
15.7 The Minister tells us that the ECB Opinion
will be taken into account during the continuing negotiation of
the draft Regulation.
CONCLUSION
15.8 Given its relationship to the draft Regulation
on CSDs and securities settlement, we do not clear this document
from scrutiny. Rather, when the Minister reports to us on developments
on that proposal, we should like to hear of any significant issues
in the negotiations arising from the ECB Opinion.
64 (33761) 7619/12 + ADDs 1-2: see HC 428-lvii (2010-12),
chapter 6 (18 April 2012) and HC 86-ii (2012-13), chapter 15 (16
May 2012). Back
65
See http://www.ecb.int/paym/t2s/html/index.en.html. Back
66
See http://www.hm-treasury.gov.uk/consult_financial_sector_resolution_broadening_regime.htm. Back
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