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Recovery and resolution of CCPs: EU Commission publishes legislative proposal

06/12/2016 Clifford Chance

The proposed framework aims to complement the existing recovery and resolution models already adopted for banks and investment firms under the Bank Recovery and Resolution Directive (BRRD), setting out comparable provisions adapted to the specific features of CCPs' business models and the risks they incur.

Amongst other things, the proposed rules:

  • require CCPs to draw up recovery plans which would include measures to overcome any form of financial distress which would exceed their default management resources and other requirements under the European Market Infrastructure Regulation (EMIR);
     
  • require resolution authorities to prepare resolution plans for how CCPs would be restructured and their critical functions maintained in the unlikely event of their failure;
     
  • grant supervisors specific powers to intervene in the operations of CCPs where their viability is at risk but before they reach the point of failure; and
     
  • establish resolution colleges for each CCP to ensure effective planning and orderly resolution if needed.

The proposed Regulation will now be submitted to the EU Parliament and Council for their approval and adoption.