Activities of Kay SWINBURNE related to 2016/0365(COD)
Plenary speeches (1)
Framework for the recovery and resolution of central counterparties (A8-0015/2018 - Babette Winter, Kay Swinburne) (vote)
Reports (1)
REPORT on the proposal for a regulation of the European Parliament and of the Council 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 PDF (1 MB) DOC (197 KB)
Amendments (57)
Amendment 221 #
Proposal for a regulation
Recital 4
Recital 4
(4) As a significant amount of the financial risk of the Union financial system is processed by and concentrated in CCPs on behalf of clearing members and their clients, effective regulation and robust supervision of CCPs is essential. In force since August 2012, Regulation (EU) No 648/2012 of the European Parliament and of the Council19 requires CCPs to observe high prudential, organisational and conduct of business standards. Competent authorities are tasked with the full oversight of their activities, working together within supervisory colleges which group together relevant authorities for the specific tasks allocated to them. In accordance with commitments entered into by G20 leaders since the financial crisis, Regulation (EU) No 648/2012 also requires standardised OTC derivatives to be centrally cleared by a CCP. As the obligation to centrally clear OTC derivatives comes into effect, the volume and range of business done by CCPs is likely to increase which may, in turn, provide additional challenges for the CCPs' risk management strategies. __________________ 19 Regulation (EU) No 648/2012 of the European Parliament and of the Council of 4 July 2012 on OTC derivatives, central counterparties and trade repositories (OJ L 201, 27.7.2012, p. 1).
Amendment 222 #
Proposal for a regulation
Recital 6 a (new)
Recital 6 a (new)
(6a) Should a CCP reach the stage where all recovery measures, as set out in the CCPs rule book, have been exhausted and have failed in their attempt to recover the CCP, the Resolution Authority when assessing the tools available for continuation of service in resolution should not assume public support with taxpayers funds unless an assessment on the viability of the central clearing model has been made and a full wind down considered. The concurrent failure of multiple systemically important global CCPs should be factored into such a consideration.
Amendment 223 #
Proposal for a regulation
Recital 7
Recital 7
(7) The objective of a credible recovery and resolution framework is to ensure, to the greatest extent possible, that CCPs set out measures to recover from financial distress, to maintain the critical functions of a CCP which is failing or likely to fail while winding down the remaining activities through normal insolvency proceedings, and to preserve financial stability while minimising the cost of a CCP failure on end clients and taxpayers. The recovery and resolution framework further bolsters CCPs' and authorities' preparedness to mitigate financial stress and provide authorities with further insight into CCPs' preparations for stress scenarios. It also provides authorities with powers to prepare for the potential resolution of a CCP and deal with the declining health of a CCP in a coordinated manner, thus contributing to the smooth functioning of financial markets.
Amendment 231 #
Proposal for a regulation
Recital 20 a (new)
Recital 20 a (new)
(20a) The recovery plan should ensure that the sequencing of the use of recovery tools properly balances the allocation of losses between CCPs, clearing members and their clients. Before instigating a cash call upon clearing members, CCPs must contribute their own capital, and before instigating variation margin gains haircutting, which effects the clients of clearing members, the CCP must first carry out cash calls upon clearing members. Ultimately the end user of the CCP should be protected where possible and it should be those direct members of the CCP that, again where possible, should bear losses.
Amendment 236 #
Proposal for a regulation
Recital 23 a (new)
Recital 23 a (new)
(23a) CCPs should ensure that clients of non-defaulting clearing members are appropriately recompensed should their assets be used during the recovery process.
Amendment 237 #
Proposal for a regulation
Recital 23 b (new)
Recital 23 b (new)
(23b) CCPs should be prevented from using recovery tools to reduce the value of the collateral posted to the CCP's non- defaulting clearing members as initial margin related to those services, or to otherwise reduce the value of or extinguish the CCP's obligation to return or redeliver initial margin to non- defaulting clearing members.
Amendment 250 #
Proposal for a regulation
Recital 38
Recital 38
(38) The critical functions of a failing CCP should be maintained, albeit re- structured with changes to the management where appropriate, through the use of resolution tools as a going concern with the use, to the extent possible, of private funds. That could be achieved either through sale to or merger with a solvent third party, or after having restructured orthat do not rely on public support. That could be achieved by allocating outstanding losses and restoring the CCP to a matched book through the use of the position and loss allocation tools in the case of default losses, or, in the case of non-default losses, through written down theand contracts and liabilities of the CCP via the allocation of losses and positions, or after having written down shares or written down and converted its debt to equity, in order to effect a recapitalisationversion to equity of unsecured liabilities to absorb losses and recapitalize the CCP. A CCP or specific clearing service may also be sold to or merged with a solvent third party CCP that is able to conduct and manage the transferred clearing activities. In line with this objective, prior to these actions, the resolution authority should consider enforcing any existing and outstanding contractual obligations of the CCP in line with how they would be called in under normal insolvency proceedingtreated under the CCP’s operating rules.
Amendment 253 #
Proposal for a regulation
Recital 43
Recital 43
(43) For the purpose of protecting the right of shareholders, counterparties and creditors, clear obligations should be laid down concerning the valuation of the assets and liabilities of the CCP and the valuation of the treatment that share holders and creditors would have received if the resolution authority would not have taken resolution action. It should be possible to commence a valuation already during the recovery phase. Before any resolution action is taken, a fair and realistic valuation of the assets and liabilities of the CCP should be carried out including the price at which any termination of contracts in the CCP “tear up” would be undertaken which should take into account market volatility and liquidity at the time of the resolution. Such a valuation should be subject to a right of appeal only together with the resolution decision. In addition, in certain cases, an ex-post comparison between the treatment that shareholders and creditors have actually been afforded and the treatment they would have received if the resolution authority woulhad not have taken resolution action in relation to the CCP and if they woulhad instead have been subject to possible outstanding obligations pursuant to the CCP's recovery plan or other arrangements in its operating rules or under normal insolvency proceedings, should be carried out after resolution tools have been used. Where shareholders and creditors have received, in payment of, or compensation for, their claims, less than the amount that they would have received if the resolution authority woulhad not have taken resolution action in relation to the CCP and if they woulhad instead have been subject to possible outstanding obligations pursuant to the CCP's recovery plan or other arrangements in its operating rules or under normal insolvency proceedings, they should in certain cases be entitled to the payment of the difference. The calculation of the amount that they would have received should not assume provision of public financial support nor should it include the value of so-called replacement costs, as these are yet to be defined at global level. Should a strict definition emerge as a result of work undertaken by the FSB at global level, a review may be conducted to consider their inclusion. As opposed to the valuation prior to the resolution action, it should be possible to challenge that comparison separately from the resolution decision. Member States should be free to decide on the procedure as to how to pay any difference of treatment that has been determined to shareholders and creditors.
Amendment 255 #
Proposal for a regulation
Recital 45
Recital 45
(45) Upon entry into resolution, the Resolution Authority should ensure any outstanding contractual obligations set out in the operating rules of the CCP, including outstanding recovery measures, should bare honoured except where the exercise of another resolution power or tool is more appropriate to avoidmitigate adverse effects for financial stability or to secure the critical functions of the CCP in a timely manner. LIn the case of default losses, the resolution authority should use position allocation tools where necessary to restore the CCP to a matched book as equitably as possible and allocate losses through use of position and loss allocation tools. Non-default losses should then be absorbed by regulatory capital instruments and should be allocated to shareholders up to their capacity either through the cancellation or transfer of instruments of ownership or through severe dilution. Where those instruments are not sufficient, resolution authorities should have the power to write down subordinated unsecured debt and senior unsecured liabilities, to the extent necessary, without jeopardising broader financial stability, in accordance with their ranking under applicable national insolvency law.
Amendment 259 #
Proposal for a regulation
Recital 50
Recital 50
(50) In order to ensure that resolution authorities have the necessary flexibility to allocate losses and positions to counterparties in a range of circumstances, it is appropriate that those authorities are able to firstly apply the loss and position allocation tools both where the objective is to maintain the operations of the failcritical clearing services withing CCP aund where critical servier resolution and subsequently, should this be neces sarey, transferred such critical services to a bridge CCP or a third party andleaving the residual part of the CCP to ceases to operateion and isbe wound up.
Amendment 261 #
Proposal for a regulation
Recital 53
Recital 53
(53) RWith due respect for the impact on financial stability and as a last resort, resolution authorities should be able to excluconsider ornly partially exincludeing some contracts from loss and position allocation in a number of circumstances. Where those exclusions are appliedtools are exercised only partially, the level of loss or exposure applied to other contracts may be increased to take account of such exclusionsmodified subject to the "no creditor worse off principle" being respected.
Amendment 268 #
Proposal for a regulation
Recital 79
Recital 79
(79) When taking decisions or actions under this Regulation, competent authorities and resolution authorities should always have due regard to the impact of their decisions and actions on financial stability in other Member Statejurisdictions and on the economic situation in other Member Statejurisdictions and should give consideration to the significance of any clearing member for the financial sector and the economy of the Member Statejurisdictions where such a clearing member is established.
Amendment 299 #
Proposal for a regulation
Article 4 – paragraph 2 a (new)
Article 4 – paragraph 2 a (new)
2a. The CCP’s competent authority, in consultation with the college, shall assess the CCP’s recovery arrangements in terms of their effect on the Union's financial stability if these arrangements are fully deployed. The CCP’s recovery arrangements shall be subject to regular stress-testing and crisis simulation exercises, under scenarios defined by the CCP’s competent authority in consultation with the college. The results of these tests will be reported by the competent authority for the CCP to the members of the CCP’s college and resolution college. ESMA, in cooperation with the ESCB and banking supervisors, including the ECB when performing its prudential supervision tasks, shall consider the aggregate effect on Union financial stability of the simultaneous deployment of two or more CCP’s recovery or resolution arrangements as a consequence of a system-wide stress event. ESMA may share the results of its analysis with any relevant CCP’s college and resolution college. Should it identify any shortcomings in the CCP’s recovery arrangements, the CCP’s competent authority in consultation with the college shall require the CCP to address these shortcomings and resubmit its arrangements for another round of stress tests within six months of the previous stress tests.
Amendment 301 #
Proposal for a regulation
Article 4 – paragraph 4 – subparagraph 1
Article 4 – paragraph 4 – subparagraph 1
The competent and resolution authorities of clearing members established in third countries and the competent and resolution authorities of third-country CCPs with which the CCP has established interoperability arrangements mayshall be invited to participate in the resolution college as observers. Their attendance shall be conditional on those authorities being subject to confidentiality requirements equivalent, in the opinion of the chair of the college, to those laid down in Article 71.
Amendment 303 #
Proposal for a regulation
Article 5 – paragraph 1 – subparagraph 2
Article 5 – paragraph 1 – subparagraph 2
The resolution committee shall promote the development and coordination of resolution plans and developcontribute to the development of methods for the resolution of failing CCPs.
Amendment 314 #
Proposal for a regulation
Article 7 – paragraph 1 – point f
Article 7 – paragraph 1 – point f
(f) that due consideration is given to the interests of the Member Statejurisdictions where the CCP provides services and where its clearing members, their clients, and any linkedteroperable CCPs are established, and in particular the impact of any decision or action or inaction on the financial stability or fiscal resources of those Member States and the Unionjurisdictions and the global financial system as a whole;
Amendment 316 #
Proposal for a regulation
Article 7 – paragraph 1 – point g
Article 7 – paragraph 1 – point g
(g) that due consideration is given to the objectives of balancing the interests of the various clearing participants, affectedmembers, their clients, wider creditors and affected stakeholders of the CCP in the Member States involved and of avoiding unfairly prejudicing or unfairly protecting the interests of particular actors in some Member States, including avoiding unfair burden allocation across Member Statedifferent jurisdictions;
Amendment 318 #
Proposal for a regulation
Article 7 – paragraph 1 – point h – point ii
Article 7 – paragraph 1 – point h – point ii
(ii) an impact on the financial stability of the Member Statejurisdiction where the clearing members, clients or linked FMIs are established or located;
Amendment 322 #
Proposal for a regulation
Article 7 – paragraph 1 – point l
Article 7 – paragraph 1 – point l
(l) that negative economic and social effects of any decision in all the Member States and third countriejurisdictions where the CCP provides services, including negative impacts on financial stability, are mitigated.
Amendment 342 #
Proposal for a regulation
Article 9 – paragraph 7 a (new)
Article 9 – paragraph 7 a (new)
7a. In the case of a non-default event, and to maintain the strictly incentivised process, CCPs shall not use the default fund and the default waterfall or any position allocation tool, cash calls or loss allocation tool included in the CCP rulebook solely for default events that would imply the contribution of clearing members or their clients without their prior agreement. However, in line with current global considerations, a separate loss allocation tool in the case of a non- default event may be established.
Amendment 385 #
Proposal for a regulation
Article 13 – paragraph 6 – subparagraph 1 – point c
Article 13 – paragraph 6 – subparagraph 1 – point c
(c) a demonstration of hown assessment of how and whether the CCP's critical functions could be legally and economically separated, to the extent necessary, from its other functions so as to ensure their continuity upon the failure of the CCP;.
Amendment 397 #
Proposal for a regulation
Article 13 – paragraph 8 – subparagraph 1
Article 13 – paragraph 8 – subparagraph 1
ESMA, after consulting with the ESRB and taking into account the relevant provisions of Commission Delegated Regulation (EU) –/2016 supplementing Directive 2014/59/EU with regard to regulatory technical standards adopted on the basis of Article 10(9) of Directive 2014/59/EU, shall and fully respecting the principle of proportionality, may develop draft regulatory technical standards further specifying the contents of the resolution plan in accordance with paragraph 6.
Amendment 409 #
Proposal for a regulation
Article 17 – paragraph 1 – subparagraph 2
Article 17 – paragraph 1 – subparagraph 2
The report referred to in the first subparagraph shall analyse the substantive impediments to the effective use of the resolution tools and the exercise of the resolution powers in relation to the CCP, consider their impact on the business model of the CCP and recommend targeted measures to remove those impediments where possible.
Amendment 411 #
Proposal for a regulation
Article 17 – paragraph 4 – subparagraph 2 – point b a (new)
Article 17 – paragraph 4 – subparagraph 2 – point b a (new)
(ba) the effects on the provision of integrated clearing services for different products and portfolio margining across asset classes.
Amendment 414 #
Proposal for a regulation
Article 17 – paragraph 7 – point f
Article 17 – paragraph 7 – point f
(f) to the extent other powers under this Article are insufficient to make resolvability possible, require the CCP to divest specific assets;
Amendment 418 #
Proposal for a regulation
Article 17 – paragraph 7 – point k
Article 17 – paragraph 7 – point k
Amendment 419 #
Proposal for a regulation
Article 17 – paragraph 7 – point l
Article 17 – paragraph 7 – point l
Amendment 422 #
Proposal for a regulation
Article 17 – paragraph 7 – point m
Article 17 – paragraph 7 – point m
(m) require the CCP, or any group entity directly or indirectly under its control which provides financial support to the CCP to take other steps to enable capital, other liabilities and contracts to be able to absorb losses, to recapitalise the CCP or to replenish pre-funded resources, including in particular to attempt to renegotiate any liability it has issued or to revise contractual terms, with a view to ensuring that any decision of the resolution authority to write down, convert or restructure that liability, instrument or contract would be effected under the law of the jurisdiction governing that liability or instrument;
Amendment 423 #
Proposal for a regulation
Article 17 – paragraph 7 – point n
Article 17 – paragraph 7 – point n
Amendment 437 #
Proposal for a regulation
Article 19 – paragraph 3
Article 19 – paragraph 3
3. The competent authority may only apply the measures in points (a) to (k) of paragraph 1 after taking account of the impact of those measures in other Member Statejurisdictions where the CCP operates or provides services, in particular where the CCP’s operations are critical or important for local financial markets, including the places in which clearing members linked trading venues and FMIs are established.
Amendment 441 #
Proposal for a regulation
Article 19 – paragraph 7
Article 19 – paragraph 7
Amendment 469 #
Proposal for a regulation
Article 22 – paragraph 4 – subparagraph 1
Article 22 – paragraph 4 – subparagraph 1
Taking into consideration the differing sizes and nature of CCPs established in the Union, ESMA shall issue guidelines to promote the convergence of supervisory and resolution practices regarding the application of the circumstances under which a CCP is deemed to be failing or likely to fail by [PO, please insert date 12 months from entry into force of this Regulation].
Amendment 473 #
Proposal for a regulation
Article 23 – paragraph 1 – point a
Article 23 – paragraph 1 – point a
(a) all contractual obligations and other arrangements in the CCP's recovery plan are enforced either partially or in full, to the extent that they have not been exhausted before entry into resolution, unless the resolution authority determines that the use of resolution tools or the exercise of resolution powers is more appropriate to achieve the resolution objectives in a timely manner;
Amendment 478 #
Proposal for a regulation
Article 24 – paragraph 3 – subparagraph 1 – point e
Article 24 – paragraph 3 – subparagraph 1 – point e
(e) where the loss and position allocation tools are used, inform the decision on the extent of losses to be applied against affected creditors’ claims, outstanding obligations or positions in relation to the CCP and on the extent and necessity of a resolution cash call;
Amendment 484 #
Proposal for a regulation
Article 27 – paragraph 3 – subparagraph 2
Article 27 – paragraph 3 – subparagraph 2
The resolution authority mashall only partially enforce the contractual obligations referred to in points (a) and (b) where it is not possible to enforce those contractual obligations in full within a reasonable timeframeshould this be sufficient to restore the CCP's ability to comply with the conditions for authorisation and to continue to carry out its critical functions.
Amendment 504 #
Proposal for a regulation
Article 28 – paragraph 3 – subparagraph 2 – point c
Article 28 – paragraph 3 – subparagraph 2 – point c
(c) to recapitalise the CCP and replenish its pre-funded financial resources to an extent sufficient to restore its ability to comply with the condfacilitate restoration of a matched book by providing the CCP with funds to meet an auction bid which enables the CCP to allocate the defaulter's positions for authorisation and to continue to carry out its critical functionsto make payments on the contracts terminated pursuant to Article 29;
Amendment 505 #
Proposal for a regulation
Article 28 – paragraph 3 a (new)
Article 28 – paragraph 3 a (new)
3a. In a default event, the use of position and loss allocation tools shall not include the power for the resolution authority to reduce the value of the collateral posted to the CCP by non- defaulting clearing members as initial margin related to those services or to otherwise reduce the value of or extinguish the CCP's obligation to return or redeliver initial margin to (non- defaulting) clearing members.
Amendment 507 #
Proposal for a regulation
Article 29 – paragraph 1 – introductory part
Article 29 – paragraph 1 – introductory part
1. The resolution authority may terminate certain or all of the following contracts :contracts cleared by the CCP in resolution.
Amendment 508 #
Proposal for a regulation
Article 29 – paragraph 1 – point a
Article 29 – paragraph 1 – point a
Amendment 509 #
Proposal for a regulation
Article 29 – paragraph 1 – point b
Article 29 – paragraph 1 – point b
Amendment 510 #
Proposal for a regulation
Article 29 – paragraph 1 – point c
Article 29 – paragraph 1 – point c
Amendment 512 #
Proposal for a regulation
Article 29 – paragraph 2
Article 29 – paragraph 2
2. The resolution authority may only terminate the contracts referred to in point (a) of paragraph 1of the clients of the clearing member in default where the transfer of the assets and positions resulting from those contracts has not taken place within the meaning of Article 48(5) and (6) of Regulation (EU) No 648/2012.
Amendment 516 #
Proposal for a regulation
Article 30 – paragraph 1
Article 30 – paragraph 1
1. TFollowing a default event the resolution authority may reduce the valueamount of the CCP's payment obligations to non-defaulting clearing members and their clients where those obligations arise from gains due in accordance with the CCP's processes for paying variation margin or an economically identicalequivalent payment.
Amendment 521 #
Proposal for a regulation
Article 30 – paragraph 5 a (new)
Article 30 – paragraph 5 a (new)
5a. Contracts with investment firms conducted under a binding written agreement as referred to in Article 17(3)(b) of Directive 2014/65/EU shall be excluded from the provisions of this Article.
Amendment 526 #
Proposal for a regulation
Article 32 – paragraph 1 – subparagraph 2
Article 32 – paragraph 1 – subparagraph 2
Amendment 535 #
Proposal for a regulation
Article 42 – paragraph 4 – point b a (new)
Article 42 – paragraph 4 – point b a (new)
(ba) any non-defaulting clearing members that have suffered losses prior to resolution.
Amendment 536 #
Proposal for a regulation
Article 43 – paragraph 1 – subparagraph 1 – point b
Article 43 – paragraph 1 – subparagraph 1 – point b
(b) the bridge CCP shall be authorised take over the authorisations of the CCP under resolution to provide the services or carry out the activities resulting from the transfer referred to in Article 42(1) in accordance with Regulation (EU) No 648/2012, Directive 98/26/EC and Directive (EU) 2015/849.
Amendment 537 #
Proposal for a regulation
Article 43 – paragraph 1 – subparagraph 2
Article 43 – paragraph 1 – subparagraph 2
Where the bridge CCP is not authorised as required pursuant to point (b) of paragraph 1, the resolution authority shall seek the approval of the competent authority for carrying out the transfer referred to in Article 42(1). Where the competent authority approves that transfer, it shall indicate the period for which the bridge CCP's obligation to comply with the requirements of Regulation (EU) No 648/2012 is, Directive 98/26/EC and Directive (EU) 2015/849 are waived. That period shall be no longer than 12 months.
Amendment 539 #
Proposal for a regulation
Article 44
Article 44
Amendment 543 #
Proposal for a regulation
Article 45 – paragraph 1 – introductory part
Article 45 – paragraph 1 – introductory part
1. The resolution authorityA Member State may use the government stabilisation tools in accordance with Articles 46 and 47 for the purpose of resolving a CCP where the following conditions are met:
Amendment 544 #
Proposal for a regulation
Article 45 – paragraph 1 – point c a (new)
Article 45 – paragraph 1 – point c a (new)
(ca) funds can be recouped by the CCP over time if not retrieved in full through the sale to private purchasers in accordance with Article 46(3);
Amendment 547 #
Proposal for a regulation
Article 45 – paragraph 1 – point d
Article 45 – paragraph 1 – point d
Amendment 563 #
Proposal for a regulation
Article 60 – paragraph 1 – introductory part
Article 60 – paragraph 1 – introductory part
Where the resolution authority uses one or more resolution tools, it shallould aim to ensure that shareholders, creditors and clearing participants do not incur:, clearing members and their clients do not incur greater losses than they would have incurred had the resolution authority not taken resolution action in relation to the CCP at the time the resolution authority considered that the conditions for resolution pursuant to Article 22(1) were met and had they instead been subject to all possible outstanding obligations pursuant to the CCP's recovery plan, including termination of all outstanding contracts held in the CCP and all other contractual arrangements in its operating rules for either a default or a non-default event and had the CCP been wound up under normal insolvency proceedings.
Amendment 566 #
Proposal for a regulation
Article 60 – paragraph 1 – point a
Article 60 – paragraph 1 – point a
Amendment 568 #
Proposal for a regulation
Article 60 – paragraph 1 – point b
Article 60 – paragraph 1 – point b
Amendment 575 #
Proposal for a regulation
Article 61 – paragraph 2 – point a
Article 61 – paragraph 2 – point a
(a) the treatment that shareholders, creditors and clearing participamembers or their clients would have received had the resolution authority not taken resolution action in relation to the CCP the resolution authority considered that the conditions for resolution pursuant to Article 22(1) were met, and they had instead been subject to the enforcement of possible outstanding obligations pursuant to the CCP's recovery plan or, including termination of all outstanding contracts held in the CCP and other arrangements in its operating rules orand the CCP had been wound up under normal insolvency proceedings;
Amendment 583 #
Proposal for a regulation
Article 65 – paragraph 1 – introductory part
Article 65 – paragraph 1 – introductory part