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REPORT (COM(2022)0698 – C90411/2022 – 2022/0404(COD))

On the proposal for a directive of the European Parliament and of the Council amending Directives 2009/65/EU, 2013/36/EU and (EU) 2019/2034 as regards the treatment of concentration risk towards central counterparties and the counterparty risk on centrally cleared derivative transactions

A-9-2023-0399

Committee on Economic and Monetary Affairs · Rapporteur: Danuta Maria Hübner

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Parliament's amended version of a Commission proposal for a directive amending Directives 2009/65/EU, 2013/36/EU and (EU) 2019/2034 on concentration risk towards central counterparties and counterparty risk on centrally cleared derivatives. It lifts counterparty risk limits for derivative transactions centrally cleared by a CCP authorised or recognised under Regulation (EU) No 648/2012, and keeps limits for non-centrally cleared transactions. It requires credit institutions and investment firms to identify, manage, monitor and report concentration risk from exposures to central counterparties, and to develop plans and quantifiable targets for CCPs of substantial systemic importance. It gives competent authorities powers to assess these practices and to require institutions to reduce or realign exposures towards a central counterparty where excessive concentration risk is found. It sets a transposition deadline of 12 months after the entry into force of the EMIR Review Regulation and entry into force on the twentieth day after publication in the Official Journal.

Committee position. The Committee on Economic and Monetary Affairs proposes amendments to the Commission proposal, adopting its position at first reading. It lifts counterparty risk limits for centrally cleared derivatives, requires institutions to manage concentration risk towards CCPs, and gives competent authorities powers to act on excessive concentration risk.

Key points

  1. Directive 2009/65/EU gains a definition of 'central counterparty' referring to Article 2, point (1), of Regulation (EU) No 648/2012.
  2. The counterparty risk limit for UCITS derivative transactions applies only where the transaction is not centrally cleared through a CCP authorised under Article 14 or recognised under Article 25 of Regulation (EU) No 648/2012.
  3. Member States may raise the 5 % limit to a maximum of 10 %, with a 40 % cap on certain holdings, and this limitation does not apply to deposits or derivative transactions with prudentially supervised financial institutions.
  4. Directive 2013/36/EU requires effective processes to identify, manage, monitor and report risks including concentration risk from exposures towards central counterparties, taking into account Article 7a of Regulation (EU) No 648/2012.
  5. Member States must ensure the management body develops specific plans and quantifiable targets to monitor and address concentration risk from CCPs offering services of substantial systemic importance for the Union or one or more Member States.
  6. Competent authorities must assess and monitor institutions' practices on managing concentration risk towards CCPs, including the plans developed, and progress in adapting business models to relevant Union policy objectives.
  7. EBA, in coordination with ESMA, must develop guidelines for a consistent methodology to integrate concentration risk from exposures towards CCPs in supervisory stress testing.
  8. Competent authorities may require institutions to reduce exposures towards a central counterparty or realign exposures across clearing accounts where they consider there is excessive concentration risk.
  9. Directive (EU) 2019/2034 requires investment firms to have effective processes to identify, manage, monitor and report concentration risk from exposures towards central counterparties.
  10. Investment firms' internal capital adequacy assessments must cover material sources and effects of concentration risk from CCP exposures, and management bodies must develop plans and quantifiable targets for CCPs of substantial systemic importance.
  11. Competent authorities must assess investment firms' concentration risk management practices and may require firms to reduce or realign exposures towards a central counterparty where excessive concentration risk is found.
  12. Member States must transpose the directive by 12 months after the entry into force of the EMIR Review Regulation and communicate the national provisions to the Commission.

Who is affected

  • UCITS and their managers, which face counterparty risk limits only for non-centrally cleared derivative transactions.
  • Credit institutions, which must manage concentration risk towards CCPs and develop plans for CCPs of substantial systemic importance.
  • Investment firms, which must manage concentration risk towards CCPs and include it in internal capital assessments.
  • Competent authorities, which gain powers to assess practices and require reductions in exposures to CCPs.
  • Member States, which must transpose the directive into national law.

Figures and deadlines

  • 5 % limit on counterparty risk exposure that Member States may raise.
  • 10 % maximum to which the 5 % limit may be raised.
  • 40 % cap on total value of certain holdings when the 5 % limit is raised.
  • Transposition deadline: 12 months after the date of entry into force of the EMIR Review Regulation.
  • Entry into force: on the twentieth day following publication in the Official Journal.

Legal basis: Article 53(1) of the Treaty on the Functioning of the European Union.