Changes from report parliamentary committee draft to plenary report

DRAFT EUROPEAN PARLIAMENT LEGISLATIVE RESOLUTION

▸8 unchanged paragraphs

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

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

(Ordinary legislative procedure: first reading)

The European Parliament,

– having regard to the Commission proposal to Parliament and the Council (COM(2022)0698),

– having regard to Article 294(2) and Article 53(1) of the Treaty on the Functioning of the European Union, pursuant to which the Commission submitted the proposal to Parliament (C90411/2022),

– having regard to Article 294(3) of the Treaty on the Functioning of the European Union,

– having regard to Rule 59 of its Rules of Procedure,

Changed– having regard to the report of the Committee on Economic and Monetary Affairs (A90000/2023),(A9-0399/2023),

1. Adopts its position at first reading hereinafter set out;

2. Calls on the Commission to refer the matter to Parliament again if it replaces, substantially amends or intends to substantially amend its proposal;

3. Instructs its President to forward its position to the Council, the Commission and the national parliaments.

Change 1

RemovedRecital 2: (2) To contribute to the objectives of the Capital Markets Union it is necessary, for the efficient use of CCPs, to address certain impediments to the use of central clearing in Directive 2009/65/EU and to provide clarifications in Directives 2013/36/EU, and (EU) 2019/2034. The excessive reliance of the Union financial system on systemically important third-country CCPs (Tier 2 CCPs) could pose financial stability concerns that needs to be addressed appropriately. To ensure the financial stability in the Union and adequately mitigate potential risks of contagion across the Union financial system, appropriate measures should therefore be introduced to foster the identification, management and monitoring of concentration risk arising from exposures towards CCPs. In that context, Directives 2013/36/EU and (EU) 2019/2034 should be amended to encourage institutions and investment firms to take the necessary steps to adapt their business model to ensure the consistency with the new requirements for clearing introduced by the revision of Regulation (EU) No 648/2012 and to overall enhance their risk management practices, also considering the nature, scope and complexity of their market activities. Directives 2013/36/EU and (EU) 2019/2034 should also be amended to further clarify the role of competent authorities in addressing any excessive concentration risk that might arise from the exposures of the credit institutions and investment firms under their supervision towards CCPs, in pa…

AddedAMENDMENTS BY THE EUROPEAN PARLIAMENT*

RemovedArticle 104 of Directive 2013/36/EU provides a supervisory toolbox to competent authorities that is not limited to the imposition of additional capital requirements. The reference to the Pillar 2 tools and powers in this recital should remain broad, as it is not suitable to determine ex ante which of these tools and powers would be appropriate to address excessive concentration risk in this context

Addedto the Commission proposal

RemovedRecital 2 a (new): (2a) Competent authorities should be empowered to review the plans which credit institutions and investment firms are required to develop, taking into account the methodology for the calibration of the active account requirement. To appropriately review such plans, competent authorities should have at their disposal the details of the level of clearing services identified as of substantial systemic importance to be maintained in the active accounts in the Union CCPs by financial and non-financial counterparties subject to the clearing obligation specified pursuant to Article 7a(5) of Regulation (EU) No 648/2012.

Added---------------------------------------------------------

RemovedThe application of the proposed Pillar 2 framework is conditioned on the active account requirement. On that basis, competent authorities can only implement the proposed supervisory powers regarding the supervised entities’ plans where full transparency on the calibration of the active account is achieved via the publication and endorsement of ESMA’s draft regulatory technical standards (under the proposed Article 7a(5) of EMIR).

Added2022/0404 (COD)

RemovedDirective 2013/36/EU

AddedProposal for a

RemovedArticle 2 – paragraph 1 – point 3, Article 81: Competent authorities shall assess and monitor developments of institutions’ practices concerning the management of their concentration risk arising from exposures towards central counterparties, including the plans developed in accordance with Article 76(2) of this Directive, taking into account the requirements set out in Article 7a and any relevant information provided by the joint monitoring mechanism referred to in Article 23c of Regulation (EU) No 648/2012.

AddedDIRECTIVE OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL

RemovedTaking the results of the JMM's monitoring into account would enhance the assessment of competent authorities regarding the concentration risk institutions under their supervision may face towards services of substantial systemic importance provided by third-country CCPs. Furthermore, while the assessment of concentration risk potentially impacting the safety and soundness of an individual institution is within the competent authority’s remit, the adaptation of business plans to adjust to wider Union policy objectives is not.

Addedamending 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

Added(Text with EEA relevance)

AddedTHE EUROPEAN PARLIAMENT AND THE COUNCIL OF THE EUROPEAN UNION,

AddedHaving regard to the Treaty on the Functioning of the European Union, and in particular Article 53(1) thereof,

AddedHaving regard to the proposal from the European Commission,

AddedAfter transmission of the draft legislative act to the national parliaments,

AddedHaving regard to the opinion of the European Central Bank,

AddedActing in accordance with the ordinary legislative procedure,

AddedWhereas:

Added(1) To ensure consistency with Regulation (EU) No 648/2012 and to ensure the proper functioning of the internal market, it is necessary to lay down in Directive 2009/65/EU a uniform set of rules to address counterparty risk in derivative transactions performed by undertakings for collective investment in transferable securities (UCITS), where the transactions have been cleared by a CCP that is authorised or recognised under that Regulation. Directive 2009/65/EU imposes regulatory limits on counterparty risk only to OTC derivative transactions, irrespective of whether the derivatives have been centrally cleared. As central clearing arrangements mitigate counterparty risk that is inherent in derivative contracts, it is necessary to take into consideration whether a derivative has been centrally cleared by a CCP that is authorised or recognised under that Regulation and to establish a level playing-field between exchange traded and OTC derivatives, when determining the applicable counterparty risk limits. It is also necessary for regulatory and harmonisation purposes, to lift counterparty risk limits only when the counterparties use CCPs that are authorised in a Member State or recognised, in accordance with Regulation (EU) No 648/2012, to provide clearing services to clearing members and their clients.

Added(2) To contribute to the objectives of the Capital Markets Union it is necessary, for the efficient use of CCPs, to address certain impediments to the use of central clearing in Directive 2009/65/EU and to provide clarifications in Directives 2013/36/EU, and (EU) 2019/2034. The excessive reliance of the Union financial system on systemically important third-country CCPs (Tier 2 CCPs) could pose financial stability concerns that needs to be addressed appropriately. To ensure the financial stability in the Union and adequately mitigate potential risks of contagion across the Union financial system, appropriate measures should therefore be introduced to foster the identification, management and monitoring of concentration risk arising from exposures towards CCPs. In that context, Directives 2013/36/EU and (EU) 2019/2034 should be amended to encourage institutions and investment firms to take the necessary steps to adapt their business model to ensure the consistency with the new requirements for clearing introduced by the revision of Regulation (EU) No 648/2012 and to overall enhance their risk management practices, also considering the nature, scope and complexity of their market activities. Directives 2013/36/EU and (EU) 2019/2034 should also be amended to further clarify the role of competent authorities in addressing any excessive concentration risk that may arise from exposures of credit institutions and investment firms under their supervision towards CCPs, in particular third-country CCPs that are of substantial systemic importance to the Union or one or more of its Member States and offer services identified by the European Securities and Markets Authority (ESMA) as being of substantial systemic importance. Furthermore, competent authorities should be better equipped with additional, more granular, tools and powers under the Pillar 2 to enable them to take suitable and decisive actions based on the conclusions of their supervisory assessments.

Added(2a) Competent authorities should be empowered to review the plans which credit institutions and investment firms are required to develop, taking into account the methodology for the calibration of the active account requirement. To appropriately review such plans, competent authorities should have at their disposal the details of the level of clearing services identified as being of substantial systemic importance to be maintained in the active accounts in Union CCPs by financial and non-financial counterparties subject to the clearing obligation specified pursuant to Article 7a(5) of Regulation (EU) No 648/2012.

Added(3) Directives 2009/65/EU, 2013/36/EU and (EU) 2019/2034 should therefore be amended accordingly.

Added(4) Since the objectives of this Directive, namely ensuring that credit institutions, investment firms and their competent authorities adequately monitor and mitigate the concentration risk arising from exposures towards Tier 2 CCPs which offer services of substantial systemic importance and eliminating counterparty risk limits for derivative transactions that are centrally cleared by a CCP authorised or recognised in accordance with Regulation (EU) No 648/2012 cannot be sufficiently achieved by the Member States but can rather, by reason of their scale and effects, be better achieved at Union level, the Union may adopt measures, in accordance with the principle of subsidiarity as set out in Article 5 of the Treaty on European Union. In accordance with the principle of proportionality, as set out in that Article, this Directive does not go beyond what is necessary in order to achieve those objectives,

AddedHAVE ADOPTED THIS DIRECTIVE:

AddedAmendments to Directive 2009/65/EC

AddedDirective 2009/65/EC is amended as follows:

Added(1) in Article 2(1), the following point (u) is added:

Added‘(u) ‘central counterparty’ (‘CCP’) means a CCP as defined in Article 2, point (1), of Regulation (EU) No 648/2012 of the European Parliament and of the Council*2.

Added___________

Added*2 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).’;

Added(2) Article 52 is amended as follows:

Added(a) in paragraph 1, second subparagraph, the introductory wording is replaced by the following:

Added‘The risk exposure to a counterparty of the UCITS in a derivative transaction that is not centrally cleared through a CCP authorised in accordance with Article 14 of Regulation (EU) No 648/2012 or recognised in accordance with Article 25 of that Regulation, shall not exceed either:’;

Added(b) paragraph 2 is amended as follows”

Added(i) the first subparagraph is replaced by the following:

Added‘Member States may raise the 5 % limit laid down in the first subparagraph of paragraph 1to a maximum of 10 %. If they do so, however, the total value of the transferable securities and the money market instruments held by the UCITS in the issuing bodies in each of which it invests more than 5 % of its assets shall not exceed 40 % of the value of its assets. That limitation shall not apply to deposits or derivative transactions made with financial institutions subject to prudential supervision.’;

Added(ii) in the second subparagraph, point (c) is replaced by the following:

Added‘(c) exposures arising from derivative transactions that are not centrally cleared through a CCP authorised in accordance with Article 14 of Regulation (EU) No 648/2012 or recognised in accordance with Article 25 of that Regulation, undertaken with that body.’.

AddedAmendments to Directive 2013/36/EU

AddedDirective 2013/36/EU is amended as follows:

Added(1) in Article 74(1), [point (b)] is replaced by the following:

Added“[(b)] effective processes to identify, manage, monitor and report the risks they are or might be exposed to in the short, medium and long term time horizon, including environmental, social and governance risks, as well as concentration risk arising from exposures towards central counterparties, taking into account the conditions set out in Article 7a of Regulation (EU) No 648/2012 of the European Parliament and of the Council*1,;”

Added___________