13 Financial services: central securities
depositaries and securities settlement ~
| (a)
(33761)
7619/12
+ ADDs 1-2
COM(12) 73
(b)
(34237)
13821/12
—
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Draft Regulation on improving securities settlement in the European Union and on central securities depositories (CSDs) and amending Directive 98/26/EC
European Central Bank 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 | (a) Article 114 TFEU; co-decision; QMV
(b) —
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| Department | HM Treasury
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| Basis of consideration | Minister's letter of 10 September 2013
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| Previous Committee Reports | (a) HC 428-lvii (2010-12), chapter 6 (18 April 2012), HC 86-ii (2012-13), chapter 15 (16 May 2012) and HC 83-ix (2013-14), chapter 7 (10 July 2013)
(b) HC 86-xvi (2012-13), chapter 15 (24 October 2012) and HC 83-ix (2013-14), chapter 7 (10 July 2013)
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| Discussion in Council | Possibly between 14 September and 7 October 2013
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| Committee's assessment | Politically important
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| Committee's decision | Document (a) not cleared, but scrutiny waiver given; document (b) cleared
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Background
13.1 The Commission has in recent years proposed 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.
13.2 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 central clearing party
(CCP).
13.3 Central Securities Depositories (CSDs) are systemically
important financial market infrastructures that support the settlement
of securities. They perform a number of crucial services that
support the issuance, safekeeping, and settlement of securities,
which support the efficient functioning of the financial market.
13.4 In March 2012 the Commission presented this
draft Regulation on CSDs and securities settlement, document (a),
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.
13.5 We have considered this proposal thrice previously.
We learnt 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. But we have had only limited information on some of
the matters of concern to the Government and other Member States
or which might need further consideration.
13.6 In August 2012 the European Central Bank (ECB)
published an Opinion, document (b), on the draft Regulation. We
heard that the ECB Opinion would be taken into account during
the continuing negotiation of the draft Regulation and asked to
be told of any significant issues arising from the Opinion during
that negotiation.
13.7 When we last considered this matter, in July,
we were asked to give the Government a waiver, in terms of the
Scrutiny Reserve Resolution of 17 November 1998, or clear the
proposal from scrutiny, so that the Government would be "in
good position to support a favourable agreement should the opportunity
arise" during negotiations anticipated in the coming weeks.
We said that, whilst we recognised why the Government might find
the waiver or clearance requested useful, we did not wish to grant
either as things stood at that time. This was because:
- we were unclear as to what
might constitute acceptable outcomes on the three principal outstanding
issues mentioned to us;
- we had little information on the resolution of
other issues, other than the matter of a deadline for dematerialisation;
and
- we did not have confirmation that no significant
issues had arisen from the ECB Opinion.
13.8 We asked to have more information on these matters
and also on further developments in Council working party negotiations
before considering the draft Regulation further. Meanwhile the
documents remained under scrutiny.[32]
The Minister's letter
13.9 The Financial Secretary to the Treasury (Greg
Clark) tells us first that the three principal outstanding issues
remain under discussion. He says, on the process for authorisation
of banking services, that:
- the Government continues to
call for a system in which there is close cooperation between
relevant national authorities and which ensures that the home
national authority plays a prominent role in authorisation decisions;
and
- the Council has been trying to agree on the details
of a process that achieves this objective.
13.10 On the securities settlement regime, the Minister
says that the Government has secured significant progress in ensuring
there is sufficient flexibility in relation to less-liquid securities
and markets. He comments that, in particular, the time period
to complete a mandatory buy-in will now be set out in regulatory
technical standards according to asset type and liquidity of the
relevant instrument.
13.11 On the third country regime, the Minister says
that the Government is seeking to ensure the regime for CSDs from
non-EU jurisdictions does not unduly obstruct cross-border business
and that the relevant national authorities have a key role in
determining whether third country CSDs may provide CSD services
in their jurisdiction.
13.12 As for resolution of other issues the Minister
tells us that some fundamental issues, such as the process for
authorising a CSD for core services, the organisational requirements
of a CSD and the supervision of a CSD have been mostly settled,
with only small technical tweaks under consideration.
13.13 Finally, the Minister confirms that no significant
issues in the negotiations have arisen from the ECB Opinion.
13.14 Turning to progress in Council consideration
of the draft Regulation the Minister says that:
- negotiations remain fluid on
the outstanding issues he outlines;
- it is likely that discussions will continue right
up until the Presidency seeks a General Approach, which is expected
now to be sometime during the Conference Recess;
- he hopes that this update will be sufficient
to enable us to clear the proposal and the ECB Opinion from scrutiny,
so that the Government is in good position to support a favourable
agreement should the opportunity arise; and
- he appreciates that we have only been given a
short time to consider this update prior to the forthcoming recess,
but this has proved unavoidable as the Government was only made
aware of the expedited timetable in the last few days.
Conclusion
13.15 Given the continued uncertainty about the
outcome of discussion of the process for authorisation of banking
services and of the third country regime we remain reluctant to
clear the draft Regulation from scrutiny. However, we recognise
the difficulty caused by the imminent recess and grant, in terms
of the Scrutiny Reserve Resolution of 17 November 1998, a waiver
to allow the Government to participate in a General Approach if
a favourable agreement arises during the Conference Recess. However,
that waiver will lapse after the recess and we expect to hear
from the Minister in October about whatever developments there
have been. Meanwhile the draft Regulation remains under scrutiny.
13.16 As for the ECB Opinion we now clear that
document.
32 See headnote. Back
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