Shearman & Sterling LLP | Financial Regulatory Developments Focus | Proposed European Regulation on CCP Recovery & Resolution Published
Financial Regulatory Developments Focus
  • Proposed European Regulation on CCP Recovery & Resolution Published
    The European Commission published a legislative proposal for a Regulation on the recovery and resolution of CCPs. The aim of the proposed Regulation is to set up a framework for the orderly recovery of a CCP through implementation of recovery plans. Under the proposal, a CCP's recovery plan will need to be agreed between the CCP and its clearing members. If the recovery measures do not restore the CCP’s viability, the CCP's resolution authority will have the power to take action to ensure the continuity of the CCP's critical functions and, if needed, resolve the CCP.  This includes setting up bridge CCPs. In the event of losses arising under a resolution, these will be borne by a CCP's owners, creditors and counterparties in line with the hierarchy of claims in insolvency.  Managers of a CCP will be capable of being replaced and held accountable for wrongdoing under the applicable national laws. The CCP recovery and resolution framework would apply to all CCPs established in the EU. It is not proposed that the recovery and resolution framework would apply to the wider group of a CCP, but a resolution authority would be able to decide on a case-by-case basis whether a recovery plan should include a parent company.

    The European Commission notes that recovery and resolution planning for firms other than banks, investment firms and CCPs is still in early stages but that measures may be needed in the future, depending on the economic and financial risks that may arise in specific sectors. 

    The proposed Regulation is now subject to the European legislative process. It is intended that the proposed Regulation would enter into force on the same day that the proposed revisions to the Bank Recovery and Resolution Directive enter into force. As a regulation, the proposed Regulation would be directly applicable in all EU Member States. 

    View the proposed CCP RR Regulation.