Part III Post-Trading Infrastructures, 12 Central Counterparties Insolvency and Resolution in the EU

Abstract

This chapter assesses the international policy debate on insolvency management in relation to central counterparties (CCPs), as well as the general context in the European regulatory framework for the licensing and ongoing regulation of CCPs. It then turns to a closer examination of the new Regulation, which has been strongly influenced by the Financial Stability Board’s (FSB) ‘Key Attributes of Effective Insolvency Regimes for Financial Institutions’ of 2014, but is far more detailed and prescriptive. While the prudential requirements for CCPs’ own risk mitigation and loss management arrangements established under the European Market Infrastructure Regulation (EMIR) have been taken as the basis for recovery measures, the Regulation introduces some key features of recovery and resolution regimes for banking institutions also in relation to CCPs. Just as banks, CCP operators, under the Regulation, will be required to engage in rigorous recovery planning, while resolution authorities are required, in turn, to develop resolution plans in order to prepare for future contingencies. For the actual resolution stage, the Regulation prescribes a number of statutory tools, some of which have also been adapted from the corresponding regime for failing banks.