Recovery and Resolution of CCPs: Obsessing over regulatory symmetry?

The reason why an international approach, and not just a national or regional one, is necessary for recovery and resolution is clear: many CCPs are globally systemic, in that they clear derivatives in global markets and their members and clients’ members are from across the world. Unfortunately, despite its best efforts with recent legislative initiatives, Europe seems still quite unable to deliver an optimal regional dimension of supervision on EU CCPs. However, out of any obsession for regulatory symmetry, the two-tiered approach in third-country (TC) CCP supervision also carries a lesson for EU CCPs supervision. ESMA could be the key supervisor for all systemically relevant Tier 2 CCPs, EU and TC alike. 

So far, out of the 16 EU-based CCPs, 10 are located in the euro area. Three – and among them LCH – are based in the United Kingdom and are therefore bound to become third-country CCPs. Of the remaining three, one is Swedish and is the European leg of Nasdaq OMX clearing. The latter two are Tier 1 CCPs based in Poland and Hungary. Among the 10 CCPs located within the euro area, some are licensed as banks and already fall, therefore, within the scope of the BRRD and the Single Resolution Mechanism Regulation (SRMR) Wouldn’t it make sense to bring the 10 CCPs in the euro system under the umbrella of the SRB as a resolution authority and extend to them, as a last resort, the use of the temporary public sector funding mechanism of the Single Resolution Fund (SRF) and its forthcoming final fiscal backstop, the European Monetary Fund?

Marco Lamandini is Professor of Corporate and Capital Markets Law at the University of Bologna and Member of the Academic Board of ECMI. He also sits on the Board of Appeal of the ESAs – appointed by ESMA and the Appeal Panel of the SRB.