Documents considered by the Committee on 29 March 2017 Contents

3Financial services regulatory framework: central counterparties

Committee’s assessment

Politically important

Committee’s decision

Not cleared from scrutiny; further information requested

Document details

Proposed Regulation concerning central counterparties

Legal base

Article 114 TFEU, ordinary legislative procedure, QMV

Department

HM Treasury

Document Number

(38332), 14835/16 + ADDs 1–3, COM(16) 856

Summary and Committee’s conclusions

3.1The Commission has proposed a Regulation to establish a framework for the recovery and resolution of central counterparties. It was responding to a G20 recommendation and it aimed to be consistent with international standards.

3.2When in January 2017 we considered this proposal, we asked to be kept informed regularly about negotiating developments. We also asked to be told soon about the likely implementation date of the proposed Regulation in relation to the probable Brexit date, the Government’s view of the consequences for the UK of the proposal and, in particular, whether post-Brexit its aim would be to be closer to the relevant international standards or the EU ones, if they were divergent.

3.3The Government has now responded, saying first that its intention during negotiation of the proposed Regulation was to ensure that it would be consistent with international standards. It also told us that negotiation of the proposal by both the Council and the European Parliament was at an early stage and that therefore the dates of adoption and implementation were not yet clear. The Government did not tell us of its assessment of the consequences for the UK of the proposal.

3.4We note the implication of the Government’s response—that it is seeking to ensure that there is no divergence between the adopted form of the proposed Regulation and the relevant international standards. We presume also that it is the Government’s intention that the UK’s own legislation will continue to meet those international standards.

3.5However, we await the Government’s assessment of the consequences for the UK of the proposal, information about the dates of adoption and implementation when that becomes clearer and reports, in due course, of negotiating developments. Meanwhile the document remains under scrutiny.

Full details of the document

Proposed Regulation on a framework for the recovery and resolution of central counterparties and amending Regulations (EU) No 1095/2010, (EU) No 648/2012, and (EU) 2015/2365: (38332), 14835/16 + ADDs 1–3, COM(16) 856.

Background

3.6Following the very severe financial crisis some years ago the EU adopted a considerable amount of regulatory legislation aimed at restoring the stability of the financial services sector and preventing future problems. Much of the legislation was based on internationally agreed standards. Practical experience of the legislation and further development of standards in international fora have led to the need for amendment of important elements of the EU legislation. Most recently the Commission published a Communication analysing the results of a public inquiry it conducted in 2015 and 2016 into the EU regulatory framework for financial services. The Communication also set out the intentions for legislative and non-legislative proposals in response to the outcome of the inquiry.2 At the same time the Commission presented six legislative proposals to amend present legislation, including this proposed Regulation concerning recovery and resolution of central counterparties (CCPs).

3.7With the proposed Regulation the Commission has suggested a framework for the recovery and resolution of CCPs (as defined in the European Market Infrastructure Regulation, EMIR). It responded to a G20 recommendation3 and aimed to be consistent with international standards agreed in the Financial Stability Board (FSB)’s Key Attributes of Effective Resolution Regimes for Financial Institutions.4 The proposed Regulation covers a number of key areas including:

3.8When in January 2017 we last considered this proposal, we had extensive comment from the Government, including that:

3.9We noted that the Government would need to negotiate carefully much of the details it had drawn to our attention to ensure everything in them when adopted met its concerns. So we asked to be kept informed regularly about negotiating developments on the proposal. We also asked to be told soon:

The Minister’s letter of 20 March 2017

3.10The Economic Secretary to the Treasury (Simon Kirby) has now responded, first saying that:

3.11Turning to negotiating developments and the likely implementation date of the proposal in the context of the Brexit date, the Minister said that:

Previous Committee Reports

Twenty-fifth Report HC 71–xxiii (2016–17), chapter 6 (11 January 2017).


2 (38311) 14903/16 + ADDs 1–2: see Twenty-fifth Report HC 71-xxiii (2016–17), chapter 6 (11 January 2017).

5 The Committee on Payments and Market Infrastructures and the International Organization of Securities Commissions.




31 March 2017