Legal provisions of COM(2017)331 - Amending the regulation establishing ESMA and regulation (EU) 648/2012 as regards procedures for the authorisation of CCPs and requirements for recognition of 3rd-country CCPs

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dossier COM(2017)331 - Amending the regulation establishing ESMA and regulation (EU) 648/2012 as regards procedures for the authorisation of CCPs ...
document COM(2017)331 EN
date October 23, 2019

Contents

Article 1

Regulation (EU) No 648/2012 is amended as follows:

(1)in Article 6, paragraph 2, point (b) is replaced by the following:

‘(b)the CCPs that are authorised in accordance with Article 17 or recognised in accordance with Article 25 and the date of authorisation or recognition respectively, indicating the CCPs that are authorised or recognised for the purpose of the clearing obligation;’;

(2)in Article 15, the following paragraph is added:

‘3.In order to ensure consistent application of this Article, ESMA shall, in cooperation with the ESCB, develop draft regulatory technical standards specifying the conditions under which additional services or activities to which a CCP wishes to extend its business are not covered by the initial authorisation and therefore require an extension of authorisation in accordance with paragraph 1 of this Article and also specifying the procedure for consulting the college established in accordance with Article 18 on whether or not those conditions are met.

ESMA shall submit those draft regulatory technical standards to the Commission by 2 January 2021.

Power is delegated to the Commission to adopt the regulatory technical standards referred to in the first subparagraph in accordance with Articles 10 to 14 of Regulation (EU) No 1095/2010.’;

(3)in Article 17, paragraph 3 is replaced by the following:

‘3.Within 30 working days of receipt of the application, the competent authority shall assess whether the application is complete. Where the application is not complete, the competent authority shall set a deadline by which the applicant CCP has to provide additional information. Upon receipt of such additional information, the competent authority shall immediately transmit it to ESMA and the college established in accordance with Article 18(1). After assessing that an application is complete, the competent authority shall notify the applicant CCP and the members of the college and ESMA accordingly.’;

(4)Article 18 is amended as follows:

(a)paragraph 1 is replaced by the following:

‘1.Within 30 calendar days of the submission of a complete application in accordance with Article 17, the CCP's competent authority shall establish, manage and chair a college to facilitate the exercise of the tasks referred to in Articles 15, 17, 30, 31, 32, 35, 49, 51 and 54.’;

(b)in paragraph 2, point (a) is replaced by the following:

‘(a)the Chair or any of the independent members of the CCP Supervisory Committee referred to in points (a) and (b) of Article 24a(2);’;

(c)in paragraph 2, point (c) is replaced by the following:

‘(c)the competent authorities responsible for the supervision of the clearing members of the CCP which are established in the three Member States with the largest contributions to the default fund of the CCP referred to in Article 42 of this Regulation on an aggregate basis over a one-year period, including, where relevant, the ECB in the framework of the tasks concerning the prudential supervision of credit institutions within the single supervisory mechanism conferred upon it in accordance with Council Regulation (EU) No 1024/2013 (*1);

(*1)  Council Regulation (EU) No 1024/2013 of 15 October 2013 conferring specific tasks on the European Central Bank concerning policies relating to the prudential supervision of credit institutions (OJ L 287, 29.10.2013, p. 63).’;"

(d)in paragraph 2, the following point is inserted:

‘(ca)the competent authorities responsible for the supervision of clearing members of the CCP, other than those referred to in point (c), subject to the consent of the CCP's competent authority. Those competent authorities shall request the consent of the CCP's competent authority to participate in the college, justifying the request based on their assessment of the impact that the CCP's financial distress could have on the financial stability of their respective Member State. Where the CCP's competent authority does not grant the request, it shall provide full and detailed reasons in writing;’;

(e)in paragraph 2, the following point is added:

‘(i)the central banks of issue of the Union currencies of the financial instruments cleared or to be cleared by the CCP other than those referred to in point (h), subject to the consent of the CCP's competent authority. Those central banks of issue shall request the consent of the CCP's competent authority to participate in the college, justifying the request based on their assessment of the impact that the CCP's financial distress could have on their respective currency of issue. Where the CCP's competent authority does not grant the request, the CCP's competent authority shall provide full and detailed reasons in writing.’;

(f)in paragraph 2, the following subparagraph is added:

‘The CCP's competent authority shall publish on its website a list of the members of the college. That list shall be updated by the CCP's competent authority without undue delay after any change to the composition of the college. The CCP's competent authority shall notify that list to ESMA within 30 calendar days of the college's establishment or change in its composition. Upon reception of the notification by the CCP's competent authority, ESMA shall publish on its website without undue delay the list of the members of that college.’;

(g)in paragraph 4, the following subparagraph is added:

‘In order to facilitate the performance of the tasks assigned to colleges pursuant to the first subparagraph, members of the college referred to in paragraph 2 shall be entitled to contribute to the setting of the agenda of the college meetings, in particular by adding points to the agenda of a meeting.’;

(h)in paragraph 5, the second subparagraph is replaced by the following:

‘That agreement shall determine the practical arrangements for the functioning of the college, including detailed rules on:

(i)voting procedures as referred to in Article 19(3);

(ii)the procedures for setting the agenda of college meetings;

(iii)the frequency of the college meetings;

(iv)the format and scope of the information to be provided by the CCP's competent authority to the college members, especially with regard to the information to be provided in accordance with Article 21(4);

(v)the appropriate minimum timeframes for the assessment of the relevant documentation by the college members;

(vi)the modalities of communication between college members;

The agreement may also determine tasks to be entrusted to the CCP's competent authority or another member of the college.’;

(i)paragraph 6 is replaced by the following:

‘6.In order to ensure the consistent and coherent functioning of colleges across the Union, ESMA shall, in cooperation with the ESCB, develop draft regulatory technical standards specifying the conditions under which the Union currencies referred to in point (h) of paragraph 2 are to be considered as the most relevant and the details of the practical arrangements referred to in paragraph 5.

ESMA shall submit those draft regulatory technical standards to the Commission by 2 January 2021.

Power is delegated to the Commission to adopt the regulatory technical standards referred to in the first subparagraph in accordance with Articles 10 to 14 of Regulation (EU) No 1095/2010.’;

(5)Article 19 is amended as follows:

(a)the following paragraph is inserted:

‘1a.Where the college gives an opinion pursuant to this Regulation, at the request of any member of the college and upon adoption by a majority of the college in accordance with paragraph 3 of this Article, that opinion may include, in addition to the determination of whether the CCP complies with this Regulation, recommendations aimed at addressing shortcomings in the CCP's risk management and increasing its resilience.

Where the college may give an opinion, any central bank of issue, which is a member of the college pursuant to points (h) and (i) of Article 18(2), may adopt recommendations relating to the currency it issues.’;

(b)paragraph 3 is replaced by the following:

‘3.A majority opinion of the college shall be adopted on the basis of a simple majority of its members.

For colleges up to and including 12 members, a maximum of two college members belonging to the same Member State shall have a vote and each voting member, shall have one vote. For colleges with more than 12 members, a maximum of three members belonging to the same Member State shall have a vote and each voting member shall have one vote.

Where the ECB is a member of the college pursuant to points (c) and (h) of Article 18(2), it shall have two votes.

The members of the college referred to in points (a), (ca) and (i) of Article 18(2) shall have no voting rights on the opinions of the college.’;

(c)the following paragraph is added:

‘4.Without prejudice to the procedure prescribed in Article 17, the competent authority shall duly consider the opinion of the college reached in accordance with paragraph 1 of this Article, including any possible recommendations aimed at addressing shortcomings in the CCP`s risk management and increasing its resilience. Where the CCP's competent authority does not agree with an opinion of the college, including any recommendations contained therein aimed at addressing shortcomings in the CCP's risk management procedures and increasing its resilience, its decision shall contain full reasons and an explanation of any significant deviation from that opinion or recommendations.’;

(6)Article 21 is amended as follows:

(a)paragraph 1 is replaced by the following:

‘1.Without prejudice to the role of the college, the competent authorities referred to in Article 22 shall review the arrangements, strategies, processes and mechanisms implemented by CCPs to comply with this Regulation and evaluate the risks, including at least financial and operational risks, to which CCPs are, or might be, exposed.’;

(b)paragraph 3 is replaced by the following:

‘3.The competent authorities shall establish the frequency and depth of the review and evaluation referred to in paragraph 1, having particular regard to the size, systemic importance, nature, scale, complexity of the activities and interconnectedness with other financial market infrastructures of the CCPs concerned. The review and evaluation shall be updated at least on an annual basis.

CCPs shall be subject to on-site inspections. Upon ESMA's request, competent authorities may invite ESMA staff to participate in on-site inspections.

The competent authority may forward to ESMA any information received from the CCPs during or in relation to on-site inspections.’;

(c)paragraph 6 is replaced by the following:

‘6.By 2 January 2021, in order to ensure consistency in the format, frequency and depth of the review carried out by the national competent authorities in accordance with this Article, ESMA shall issue guidelines in accordance with Article 16 of Regulation (EU) No 1095/2010 to specify further, in a manner that is appropriate to the size, the structure and the internal organisation of CCPs and the nature, scope and complexity of their activities, the common procedures and methodologies for the supervisory review and evaluation process referred to in paragraphs 1 and 2 and in the first subparagraph of paragraph 3 of this Article.’;

(7)the following Article is inserted:

‘Article 23a

Supervisory cooperation between competent authorities and ESMA with regards to authorised CCPs

1. ESMA shall fulfil a coordination role between competent authorities and across colleges with a view to building a common supervisory culture and consistent supervisory practices, ensuring uniform procedures and consistent approaches, and strengthening consistency in supervisory outcomes, especially with regard to supervisory areas which have a cross-border dimension or a possible cross-border impact.

2. Competent authorities shall submit their draft decisions to ESMA before adopting any act or measure pursuant to Articles 7, 8, 14, 15, 29 to 33, 35, 36 and 54.

Competent authorities may also submit draft decisions to ESMA before adopting any other act or measure in accordance with their duties under Article 22(1).

3. Within 20 working days of receipt of a draft decision submitted in accordance with paragraph 2 in relation to a specific Article ESMA shall provide an opinion on that draft decision to the competent authority where necessary to promote a consistent and coherent application of that Article.

Where the draft decision submitted to ESMA in accordance with paragraph 2 shows a lack of convergence or coherence in the application of this Regulation, ESMA shall issue guidelines or recommendations to promote the necessary consistency or coherence in the application of this Regulation pursuant to Article 16 of Regulation (EU) No 1095/2010.

4. Where ESMA adopts an opinion in accordance with paragraph 3, the competent authority shall give it due consideration and shall inform ESMA of any subsequent action or inaction thereto. Where the competent authority does not agree with an opinion of ESMA, it shall provide comments to ESMA on any significant deviation from that opinion.’;

(8)Article 24 is replaced by the following:

‘Article 24

Emergency situations

The CCP's competent authority or any other relevant authority shall inform ESMA, the college, the relevant members of the ESCB and other relevant authorities without undue delay of any emergency situation relating to a CCP, including developments in financial markets, which may have an adverse effect on market liquidity, the transmission of monetary policy, the smooth operation of payment systems or the stability of the financial system in any of the Member States where the CCP or one of its clearing members are established.’;

(9)the following Chapter is inserted:

‘CHAPTER 3A

CCP Supervisory Committee

Article 24 - a CCP Supervisory Committee

1. ESMA shall establish a permanent internal committee pursuant to Article 41 of Regulation (EU) No 1095/2010 for the purposes of preparing draft decisions for adoption by the Board of Supervisors and carrying out the tasks set out in paragraphs 7, 9 and 10 of this Article (“CCP Supervisory Committee”).

2. The CCP Supervisory Committee shall be composed of:

(a)the Chair, who shall be voting;

(b)two independent members, who shall be voting;

(c)the competent authorities of Member States referred to in Article 22 of this Regulation with an authorised CCP, who shall be voting; where a Member State has designated several competent authorities, each of the designated competent authorities of this Member State may decide to appoint one representative for the purposes of participation pursuant to this point, however, for the voting procedures set out in Article 24c, the representatives of the respective Member State shall together be considered as one voting member;

(d)The following central banks of issue:

(i)where the CCP Supervisory Committee convenes in relation to third-country CCPs, in respect of the preparation of all decisions pertaining to Articles referred to in paragraph 10 of this Article in relation to Tier 2 CCPs and to Article 25(2a), the central banks of issue referred to in point (f) of Article 25(3) that have requested membership of the CCP Supervisory Committee, who shall be non-voting;

(ii)where the CCP Supervisory Committee convenes in relation to CCPs authorised in accordance with Article 14, in the context of discussions pertaining to point (b) and subpoint (iv) of point (c) of paragraph 7 of this Article, the central banks of issue of the Union currencies of the financial instruments cleared by authorised CCPs that have requested membership of the CCP Supervisory Committee, who shall be non-voting.

Membership for the purpose of subpoints (i) and (ii) shall be granted automatically upon a one-off written request addressed to the Chair.

3. The Chair may invite as observers to the meetings of the CCP Supervisory Committee, where appropriate and necessary, members of the colleges referred to in Article 18.

4. Meetings of the CCP Supervisory Committee shall be convened by its Chair at his or her own initiative or at the request of any of its voting members. The CCP Supervisory Committee shall meet at least five times a year.

5. The Chair and the independent members of the CCP Supervisory Committee shall be full-time, independent professionals. They shall be appointed by the Board of Supervisors on the basis of merit, skills, knowledge of clearing, post-trading, prudential supervision and financial matters, as well as of experience relevant to CCP supervision and regulation, following an open selection procedure.

Before the appointment of the Chair and of the independent members of the CCP Supervisory Committee, and up to one month after the selection by the Board of Supervisors, which shall submit its shortlist of selected candidates respecting gender balance to the European Parliament, the European Parliament, after having heard the selected candidates, shall approve or reject them.

Where the Chair or any of the independent members of the CCP Supervisory Committee no longer fulfils the conditions required for the performance of his or her duties or has been found guilty of serious misconduct, the Council may, on a proposal from the Commission which has been approved by the European Parliament, adopt an implementing decision to remove him or her from office. The Council shall act by qualified majority.

The European Parliament or the Council may inform the Commission that they consider the conditions for the removal of the Chair or one of the independent members of the CCP Supervisory Committee to be fulfilled, to which the Commission shall respond.

The term of office of the Chair and the independent members of the CCP Supervisory Committee shall be five years and may be extended once.

6. The Chair and the independent members of the CCP Supervisory Committee shall not hold any office at national, Union, or international level. They shall act independently and objectively in the sole interest of the Union as a whole and shall neither seek nor take instructions from Union institutions or bodies, from any government of a Member State or from any other public or private body.

Neither Member States, the Union institutions or bodies, nor any other public or private body shall seek to influence the Chair and the independent members of the CCP Supervisory Committee in the performance of their tasks.

In accordance with the Staff Regulations referred to in Article 68 of Regulation (EU) No 1095/2010, the Chair and the independent members of the CCP Supervisory Committee shall, after leaving service, continue to be bound by the duty to behave with integrity and discretion as regards the acceptance of certain appointments or benefits.

7. In relation to CCPs authorised or applying for authorisation in accordance with Article 14 of this Regulation, the CCP Supervisory Committee shall, for the purpose of Article 23a(1) of this Regulation, prepare decisions and carry out the tasks entrusted to ESMA in Article 23a(3) of this Regulation and in the following points:

(a)at least annually, conduct a peer review analysis of the supervisory activities of all competent authorities in relation to the authorisation and the supervision of CCPs in accordance with Article 30 of Regulation (EU) No 1095/2010;

(b)at least annually, initiate and coordinate Union-wide assessments of the resilience of CCPs to adverse market developments in accordance with Article 32(2) of Regulation (EU) No 1095/2010;

(c)promote the regular exchange and discussion among competent authorities designated in accordance with Article 22(1) of this Regulation in relation to:

(i)relevant supervisory activities and decisions that have been adopted by the competent authorities referred to in Article 22 when carrying out their duties in accordance with this Regulation regarding the authorisation and supervision of CCPs established in their territory;

(ii)draft decisions submitted to ESMA by a competent authority in accordance with the first subparagraph of Article 23a(2);

(iii)draft decisions submitted to ESMA by a competent authority on a voluntary basis in accordance with the second subparagraph of Article 23a(2);

(iv)relevant market developments, including situations or events which impact or are likely to impact the prudential or financial soundness or the resilience of CCPs authorised in accordance with Article 14 or their clearing members;

(d)be informed of and discuss all opinions and recommendations adopted by colleges pursuant to Article 19 of this Regulation, in order to contribute to the consistent and coherent functioning of the colleges and to foster coherence in the application of this Regulation among them.

For the purposes of points (a) to (d) of the first subparagraph, competent authorities shall provide ESMA with all relevant information and documentation without undue delay.

8. Where the activities or the exchange referred to in points (a) to (d) of paragraph 7 expose a lack of convergence and coherence in the application of this Regulation, ESMA shall issue the necessary guidelines or recommendations pursuant to Article 16 of Regulation (EU) No 1095/2010 or opinions pursuant to Article 29 of Regulation (EU) No 1095/2010. Where an assessment referred to in point (b) of paragraph 7 exposes shortcomings in the resilience of one or more CCPs, ESMA shall issue the necessary recommendations pursuant to Article 16 of Regulation (EU) No 1095/2010.

9. In addition, the CCP Supervisory Committee may:

(a)based on its activities in accordance with points (a) to (d) of paragraph 7, request the Board of Supervisors to consider whether the adoption of guidelines, recommendations and opinions by ESMA is necessary in order to address a lack of convergence and coherence in the application of this Regulation among competent authorities and colleges. The Board of Supervisors shall duly consider such requests and provide an appropriate response;

(b)submit opinions to the Board of Supervisors on decisions to be taken in accordance with Article 44 of Regulation (EU) No 1095/2010, with the exception of decisions referred to in Articles 17 and 19 of that Regulation, relating to tasks conferred on the competent authorities referred to in Article 22 of this Regulation.

10. The CCP Supervisory Committee shall, in relation to third-country CCPs, prepare draft decisions to be taken by the Board of Supervisors and carry out the tasks entrusted to ESMA in Articles 25, 25a, 25b, 25f to 25q and 85(6).

11. The CCP Supervisory Committee shall, in relation to third-country CCPs, share with the third-country CCP college referred to in Article 25c the agendas of its meetings before those meetings take place, the minutes of its meetings, the complete draft decisions it submits to the Board of Supervisors and the final decisions adopted by the Board of Supervisors.

12. The CCP Supervisory Committee shall be supported by dedicated staff from ESMA, possessing sufficient knowledge, skills and experience, in order to:

(a)prepare the CCP Supervisory Committee meetings;

(b)prepare the analyses necessary for the CCP Supervisory Committee to carry out its tasks;

(c)support the CCP Supervisory Committee in its international cooperation at administrative level.

13. For the purposes of this Regulation, ESMA shall ensure structural separation between the CCP Supervisory Committee and other functions referred to in Regulation (EU) No 1095/2010.

Article 24 - b Consultation of central banks of issue

1. With regard to decisions to be taken pursuant to Articles 41, 44, 46, 50 and 54 in relation to Tier 2 CCPs, the CCP Supervisory Committee shall consult the central banks of issue referred to in point (f) of Article 25(3). Each central bank of issue may respond. Any response shall be received within 10 working days of the transmission of the draft decision. In emergency situations, the aforementioned period shall not exceed 24 hours. Where a central bank of issue proposes amendments or objects to draft decisions pursuant to Articles 41, 44, 46, 50 and 54, it shall provide full and detailed reasons, in writing. Upon conclusion of the period for consultation, the CCP Supervisory Committee shall duly consider the amendments proposed by the central banks of issue.

2. Where the CCP Supervisory Committee does not reflect in its draft decision the amendments proposed by a central bank of issue, the CCP Supervisory Committee shall inform that central bank of issue in writing stating its full reasons for not taking into account the amendments proposed by that central bank of issue, providing an explanation for any deviations from those amendments. The CCP Supervisory Committee shall submit to the Board of Supervisors the amendments proposed by central banks of issue and its explanations for not taking them into account together with its draft decision.

3. With regard to decisions to be taken pursuant to Articles 25(2c) and 85(6), the CCP Supervisory Committee shall seek the agreement of the central banks of issue referred to in point (f) of Article 25(3) for matters relating to the currencies they issue. The agreement of each central bank of issue shall be deemed to be given, unless the central bank of issue proposes amendments or objects within 10 working days of the transmission of the draft decision. Where a central bank of issue proposes amendments or objects to a draft decision, it shall provide full and detailed reasons, in writing. Where a central bank of issue proposes amendments with respect to matters relating to the currency it issues, the CCP Supervisory Committee may only submit to the Board of Supervisors the draft decision as amended with respect to those matters. Where a central bank of issue objects with respect to matters relating to the currency it issues, the CCP Supervisory Committee shall not include those matters in the draft decision it submits to the Board of Supervisors for adoption.

Article 24 - c Decision making within the CCP Supervisory Committee

The CCP Supervisory Committee shall take its decisions by a simple majority of its voting members. In the event of a tie, the Chair shall have the casting vote.

Article 24 - d Decision making within the Board of Supervisors

Where the CCP Supervisory Committee submits draft decisions to the Board of Supervisors pursuant to Articles 25(2), 25(2a), 25(2b), 25(2c), 25(5), 25p, 85(6), 89(3b) of this Regulation and additionally only for Tier 2 CCPs in accordance with Articles 41, 44, 46, 50 and 54 of this Regulation, the Board of Supervisors shall decide on those draft decisions in accordance with Article 44 of Regulation (EU) No 1095/2010 within 10 working days.

Where the CCP Supervisory Committee submits draft decisions to the Board of Supervisors pursuant to Articles other than those referred to in the first subparagraph, the Board of Supervisors shall decide on those draft decisions in accordance with Article 44 of Regulation (EU) No 1095/2010 within three working days.

Article 24 - e Accountability

1. The European Parliament or the Council may invite the Chair and the independent members of the CCP Supervisory Committee to make a statement while fully respecting their independence. The Chair and the independent members of the CCP Supervisory Committee shall make that statement before the European Parliament and answer any questions put by its Members whenever so requested.

2. The Chair and the independent members of the CCP Supervisory Committee shall report in writing on the main activities of the CCP Supervisory Committee to the European Parliament and to the Council where requested and at least 15 days before making the statement referred to in paragraph 1.

3. The Chair and the independent members of the CCP Supervisory Committee shall report any relevant information requested by the European Parliament on an ad hoc and confidential basis. That report shall not cover confidential information relating to individual CCPs.’;

(10)Article 25 is amended as follows:

(a)paragraph 1 is replaced by the following:

‘1.A CCP established in a third country may only provide clearing services to clearing members or trading venues established in the Union where that CCP is recognised by ESMA.’;

(b)in paragraph 2, the following point is added:

‘(e)the CCP has not been determined as systemically important or likely to become systemically important in accordance with paragraph 2a and is therefore a Tier 1 CCP.’;

(c)the following paragraphs are inserted:

‘2a.ESMA shall, after consulting the ESRB and the central banks of issue referred to in point (f) of paragraph 3, determine whether a third-country CCP is systemically important or likely to become systemically important for the financial stability of the Union or of one or more of its Member States (Tier 2 CCP) by taking into account all of the following criteria:
(a)the nature, size and complexity of the CCP's business in the Union, and outside the Union to the extent its business may have a systemic impact on the Union or on one or more of its Member States, including:

(i)the value in aggregate terms and in each Union currency of transactions cleared by the CCP, or the aggregate exposure of the CCP engaged in clearing activities to its clearing members and, to the extent the information is available, their clients and indirect clients established in the Union, including where they have been designated by Member States as other systemically important institutions (O-SIIs) pursuant to Article 131(3) of Directive 2013/36/EU; and

(ii)the risk profile of the CCP in terms of, amongst others, legal, operational and business risk;

(b)the effect that the failure of or a disruption to the CCP would have on:

(i)financial markets, including the liquidity of the markets served;

(ii)financial institutions;

(iii)the broader financial system; or

(iv)the financial stability of the Union or of one or more of its Member States;

(c)the CCP's clearing membership structure including, to the extent the information is available, the structure of its clearing members' network of clients and indirect clients, established in the Union;

(d)the extent to which alternative clearing services provided by other CCPs exist in financial instruments denominated in Union currencies for clearing members and, to the extent the information is available, their clients and indirect clients established in the Union;

(e)the CCP's relationships, interdependencies, or other interactions with other financial market infrastructures, other financial institutions and the broader financial system to the extent that that is likely to have an impact on the financial stability of the Union or one or more of its Member States.

The Commission shall adopt a delegated act in accordance with Article 82 to specify further the criteria set out in the first subparagraph by 2 January 2021.

Without prejudice to the outcome of the recognition process, ESMA shall, after conducting the assessment referred to in the first subparagraph, inform the applicant CCP whether or not it is considered to be a Tier 1 CCP within 30 working days of the determination that that CCP's application is complete in accordance with the second subparagraph of paragraph 4.

2b.Where ESMA determines a CCP to be systemically important or likely to become systemically important (Tier 2 CCP) in accordance with paragraph 2a, it shall only recognise that CCP to provide certain clearing services or activities where, in addition to the conditions referred to in points (a) to (d) of paragraph 2, the following conditions are fulfilled:
(a)the CCP complies, at the moment of recognition and thereafter on an ongoing basis, with the requirements set out in Article 16 and in Titles IV and V. With regard to the CCP's compliance with Articles 41, 44, 46, 50 and 54, ESMA shall consult the central banks of issue referred to in point (f) of paragraph 3 in accordance with the procedure set out in Article 24b(1). ESMA shall take into account, in accordance with Article 25a, the extent to which a CCP's compliance with those requirements is satisfied by its compliance with comparable requirements applicable in the third country;

(b)the central banks of issue referred to in point (f) of paragraph 3 have provided ESMA with written confirmation, within 30 working days of the determination that a third-country CCP is not a Tier 1 CCP in accordance with paragraph 2a or following the review in accordance with paragraph 5, that the CCP complies with the following requirements that those central banks of issue may have imposed in the carrying out of their monetary policy tasks:

(i)to submit any information which the central bank of issue may require upon its reasoned request, where that information has not otherwise been obtained by ESMA;

(ii)to fully and duly cooperate with the central bank of issue in the context of the assessment of the CCP's resilience to adverse market developments carried out in accordance with Article 25b(3);

(iii)to open or notify the intent to open, in accordance with relevant access criteria and requirements, an overnight deposit account with the central bank of issue;

(iv)to comply with requirements, applied in exceptional situations by the central bank of issue, within its competences to address temporary systemic liquidity risks affecting the transmission of monetary policy or the smooth operation of payment systems, and relating to liquidity risk control, margin requirements, collateral, settlement arrangements or interoperability arrangements.

The requirements referred to in subpoint (iv) shall ensure the efficiency, soundness and resilience of CCPs and be aligned with those set out in Article 16 and in Titles IV and V of this Regulation.

The application of the requirements referred to in subpoint (iv) shall be a condition for recognition for a limited period of time of up to six months. Where at the end of that period the central bank of issue considers that the exceptional situation persists, the application of the requirements for recognition purposes may be extended once by an additional period not exceeding six months.

Before imposing, or extending the application of, the requirements referred to in subpoint (iv), the central bank of issue shall inform ESMA, the other central banks of issue referred to in point (f) of paragraph 3 and the members of the third-country CCP college and provide them with an explanation of the effects of the requirements it intends to impose on the efficiency, soundness and resilience of CCPs and with a justification of why the requirements are necessary and proportionate to ensure the transmission of monetary policy or the smooth operation of payment systems in relation to the currency it issues. ESMA shall submit to the central bank of issue an opinion within 10 working days of the transmission of the draft requirement or draft extension. In emergency situations, the aforementioned period shall not exceed 24 hours. In its opinion, ESMA shall consider in particular the effects of the requirements imposed on the efficiency, soundness and resilience of the CCP. The other central banks of issue referred to in point (f) of paragraph 3 may submit an opinion within the same deadline. Upon conclusion of the period for consultation, the central bank of issue shall duly consider the amendments proposed in the opinions of ESMA or the central banks of issue referred to in point (f) of paragraph 3.

The central bank of issue shall also inform the European Parliament and the Council before extending the application of requirements referred to in subpoint (iv).

The central bank of issue shall cooperate and share information on a continuous basis with ESMA and the other central banks of issue referred to in point (f) of paragraph 3 in relation to the requirements referred to in subpoint (iv), in particular in relation to the assessment of systemic liquidity risks and the effects of the imposed requirements on the efficiency, soundness and resilience of CCPs.

Where a central bank of issue imposes any of the requirements referred to in this point after a Tier 2 CCP has been recognised, compliance with any such requirement shall be considered as a condition for recognition and the central banks of issue shall provide ESMA with written confirmation, within 90 working days, that the CCP complies with the requirement.

Where a central bank of issue has not provided a written confirmation to ESMA within the deadline, ESMA may consider that requirement to be fulfilled;

(c)the CCP has provided ESMA with:

(i)a written statement, signed by its legal representative, expressing the unconditional consent of the CCP to:

—provide within three working days after service of a request by ESMA any documents, records, information and data held by that CCP at the time the request is served, and

—allow ESMA to access any of the CCP's business premises;

(ii)a reasoned legal opinion by an independent legal expert confirming that the consent expressed is valid and enforceable under the relevant applicable laws;

(d)the CCP has implemented all necessary measures and established all necessary procedures to ensure the effective compliance with the requirements laid down in points (a) and (c);

(e)the Commission has not adopted an implementing act in accordance with paragraph 2c.

2c.ESMA, after consulting the ESRB and in agreement with the central banks of issue referred to in point (f) of paragraph 3 in accordance with Article 24b(3) and commensurate with the degree of systemic importance of the CCP in accordance with paragraph 2a of this Article, may, on the basis of a fully reasoned assessment, conclude that a CCP or some of its clearing services are of such substantial systemic importance that that CCP should not be recognised to provide certain clearing services or activities. The agreement of a central bank of issue shall only relate to the currency it issues and not to the recommendation as a whole as referred to in the second subparagraph of this paragraph. In its assessment ESMA shall also:
(a)explain how compliance with the conditions set out in paragraph 2b would not sufficiently address the financial stability risk for the Union or for one or more of its Member States;

(b)describe the characteristics of the clearing services provided by the CCP, including the liquidity and physical settlement requirements associated with the provision of such services;

(c)provide a quantitative technical assessment of the costs and benefits and consequences of a decision not to recognise the CCP to provide certain clearing services or activities, taking into account:

(i)the existence of potential alternative substitutes for the provision of the clearing services concerned in the currencies concerned to clearing members, and to the extent the information is available, their clients and indirect clients established in the Union;

(ii)the potential consequences of including the outstanding contracts held at the CCP within the scope of the implementing act.

On the basis of its assessment, ESMA shall recommend that the Commission adopt an implementing act confirming that that CCP should not be recognised to provide certain clearing services or activities.

The Commission shall have a minimum of 30 working days to assess ESMA's recommendation.

After submission of the recommendation referred to in the second subparagraph, the Commission may, as a measure of last resort, adopt an implementing act specifying:

(a)that following the adaptation period specified by the Commission in accordance with point (b) of this subparagraph, some or all of the clearing services of that third-country CCP can only be provided to clearing members and trading venues established in the Union by that CCP after it has been authorised to do so in accordance with Article 14;

(b)an appropriate adaptation period for the CCP, its clearing members and their clients. The adaptation period shall not exceed two years, and may only be extended once by an additional period of six months where the reasons for granting an adaptation period still exist;

(c)the conditions under which that CCP may continue to provide certain clearing services or activities during the adaptation period referred to in point (b);

(d)any measures that shall be taken during the adaptation period, in order to limit the potential costs to clearing members and their clients, in particular those established in the Union.

In specifying the services and adaptation period referred to in points (a) and (b) of the fourth subparagraph, the Commission shall consider:

(a)the characteristics of the services offered by the CCP and their substitutability;

(b)whether and to what extent, outstanding cleared transactions shall be included within the scope of the implementing act, taking into account the legal and economic consequences of that inclusion;

(c)the potential cost implications to clearing members and, where that information is available, their clients, in particular those established in the Union.

The implementing act shall be adopted in accordance with the examination procedure referred to in Article 86(2).’;

(d)paragraph 3 is amended as follows:

(i)the introductory part is replaced by the following:

‘3.When assessing whether the conditions referred to in points (a) to (d) of paragraph 2 are met, ESMA shall consult:’;

(ii)point (f) is replaced by the following:

‘(f)the central banks of issue of all Union currencies of the financial instruments cleared or to be cleared by the CCP.’;

(e)in paragraph 4, the second to fifth subparagraphs are replaced by the following:

‘The applicant CCP shall provide ESMA with all information necessary for its recognition. Within 30 working days of receipt, ESMA shall assess whether the application is complete. If the application is not complete, ESMA shall set a deadline by which the applicant CCP is to provide additional information. ESMA shall immediately transmit all information received from the applicant CCP to the third-country CCP college.

The recognition decision shall be based on the conditions set out in paragraph 2 for Tier 1 CCPs and in points (a) to (d) of paragraph 2 and paragraph 2b for Tier 2 CCPs. It shall be independent of any assessment as the basis for the equivalence decision as referred to in Article 13(3). Within 180 working days of the determination that an application is complete in accordance with the second subparagraph, ESMA shall inform the applicant CCP in writing, with a fully reasoned explanation, whether the recognition has been granted or refused.’;

(f)in paragraph 4, the sixth subparagraph is replaced by the following:

‘ESMA shall publish on its website a list of the CCPs recognised in accordance with this Regulation, indicating their classification as Tier 1 CCPs or Tier 2 CCPs.’;

(g)paragraph 5 is replaced by the following:

‘5.ESMA shall, after consulting the authorities and entities referred to in paragraph 3, review the recognition of a CCP established in a third country:
(a)if that CCP intends to extend or reduce the range of its activities and services in the Union, in which case the CCP shall inform ESMA thereof submitting all necessary information; and

(b)in any case at least every five years.

That review shall be conducted in accordance with paragraphs 2 to 4.

Where, following the review referred to in the first subparagraph, ESMA determines that a third-country CCP that has been classified as Tier 1 CCP should be classified as a Tier 2 CCP, ESMA shall set an appropriate adaptation period which shall not exceed 18 months within which the CCP must comply with the requirements referred to in paragraph 2b. ESMA may extend that adaptation period by up to an additional six months upon the reasoned request of the CCP or competent authority responsible for the supervision of the clearing members, where such extension is justified by exceptional circumstances and implications for the clearing members established in the Union.’;

(h)paragraph 6 is replaced by the following:

‘6.The Commission may adopt an implementing act under Article 5 of Regulation (EU) No 182/2011, determining that:
(a)the legal and supervisory arrangements of a third country ensure that CCPs authorised in that third country comply on an ongoing basis with legally binding requirements which are equivalent to the requirements laid down in Title IV of this Regulation;

(b)those CCPs are subject to effective supervision and enforcement in that third country on an ongoing basis;

(c)the legal framework of that third country provides for an effective equivalent system for the recognition of CCPs authorised under third-country legal regimes.

The Commission may subject the application of the implementing act referred to in the first subparagraph to the effective fulfilment of any requirement set out therein by a third country on an ongoing basis and to the ability by ESMA to effectively exercise its responsibilities in relation to third-country CCPs recognised under paragraphs 2 and 2b or in relation to monitoring referred to in paragraph 6b, including by way of agreeing and applying the cooperation arrangements referred to in paragraph 7.’;

(i)the following paragraphs are inserted:

‘6a.The Commission may adopt a delegated act in accordance with Article 82 to specify further the criteria referred to in points (a), (b) and (c) of paragraph 6.

6b.ESMA shall monitor the regulatory and supervisory developments in third countries for which implementing acts have been adopted pursuant to paragraph 6.

Where ESMA identifies any regulatory or supervisory development in those third countries that may impact the financial stability of the Union or of one or more of its Member States, it shall inform the European Parliament, the Council, the Commission and the members of the third-country CCP college referred to in Article 25c without delay. All such information shall be treated confidentially.

ESMA shall submit a confidential report to the Commission and to the members of the third-country CCP college referred to in Article 25c on the regulatory and supervisory developments in the third countries referred to in the first subparagraph on an annual basis.’;

(j)paragraph 7 is amended as follows:

(i)the introductory part is replaced by the following:

‘7.ESMA shall establish effective cooperation arrangements with the relevant competent authorities of third countries whose legal and supervisory frameworks have been recognised as equivalent to this Regulation in accordance with paragraph 6. Such arrangements shall specify at least:’;

(ii)point (a) is replaced by the following:

‘(a)the mechanism for the exchange of information between ESMA, the central banks of issue referred to in point (f) of paragraph 3 and the competent authorities of the third countries concerned, including access to all information requested by ESMA regarding CCPs authorised in third countries, such as significant changes to risk models and parameters, extension of CCP activities and services, changes in the client account structure and in the use of payment systems that substantially affect the Union;’;

(iii)point (d) is replaced by the following:

‘(d)the procedures concerning the coordination of supervisory activities, including the agreement of third-country authorities to allow investigations and on-site inspections in accordance with Articles 25g and 25h respectively;’;

(iv)the following points are added:

‘(e)the procedures necessary for the effective monitoring of regulatory and supervisory developments in a third country;

(f)the procedures for third-country authorities to assure the effective enforcement of decisions adopted by ESMA in accordance with Articles 25b, 25f to 25m, 25p and 25q.

(g)the procedures for third-country authorities to inform ESMA, the third-country CCP college referred to in Article 25c, and the central banks of issue referred to in point (f) of paragraph 3 without undue delay of any emergency situations relating to the recognised CCP, including developments in financial markets, which may have an adverse effect on market liquidity and the stability of the financial system in the Union or one of its Member States and the procedures and contingency plans to address such situations.

(h)the consent of third-country authorities to the onward sharing of any information they have provided to ESMA under the cooperation arrangements with the authorities referred to in paragraph 3 and the members of the third-country CCP college, subject to the professional secrecy requirements set out in Article 83;’;

(v)the following final subparagraph is added:

‘Where ESMA considers that a third-country competent authority fails to apply any of the provisions laid down in a cooperation arrangement established in accordance with this paragraph, it shall inform the Commission thereof confidentially and without delay. In such a case, the Commission may decide to review the implementing act adopted in accordance with paragraph 6.’;

(11)the following Articles are inserted:

‘Article 25a

Comparable compliance

1. A CCP referred to in Article 25(2b) may submit a reasoned request that ESMA assesses whether in its compliance with the applicable third-country framework, taking into account the provisions of the implementing act adopted in accordance with Article 25(6), that CCP may be deemed to satisfy compliance with the requirements set out in Article 16 and Titles IV and V. ESMA shall immediately transmit the request to the third-country CCP college.

2. The request referred to in paragraph 1 shall provide the factual basis for a finding of comparability and the reasons why compliance with the requirements applicable in the third country satisfies the requirements set out in Article 16 and Titles IV and V.

3. The Commission, in order to ensure that the assessment referred to in paragraph 1 effectively reflects the regulatory objectives of the requirements set out in Article 16 and Titles IV and V and the Union's interests as a whole, shall adopt a delegated act specifying the following:

(a)the minimum elements to be assessed for the purposes of paragraph 1of this Article;

(b)the modalities and conditions to carry out the assessment.

The Commission shall adopt the delegated act referred to in the first subparagraph in accordance with Article 82 by 2 January 2021.

Article 25 - b Ongoing compliance with the conditions for recognition

1. ESMA shall be responsible for carrying out the duties resulting from this Regulation for the supervision on an ongoing basis of the compliance of recognised Tier 2 CCPs with the requirements referred to in point (a) of Article 25(2b). With regard to decisions pursuant to Articles 41, 44, 46, 50 and 54, ESMA shall consult the central banks of issue referred to in point (f) of Article 25(3) in accordance with Article 24b(1).

ESMA shall require confirmation from each Tier 2 CCP at least on a yearly basis that the requirements referred to in points (a), (c) and (d) of Article 25(2b) continue to be fulfilled.

Where a central bank of issue referred to in point (f) of Article 25(3) considers that a Tier 2 CCP no longer fulfils the condition referred to in point (b) of Article 25(2b), it shall immediately notify ESMA.

2. Where a Tier 2 CCP fails to provide ESMA with the confirmation referred to in the second subparagraph of paragraph 1 or where ESMA receives a notification pursuant to the third subparagraph of paragraph 1, the CCP shall be considered as no longer meeting the conditions for recognition pursuant to Article 25(2b) and the procedure set out in Article 25p(2), (3) and (4) shall apply.

3. ESMA shall, in cooperation with the ESRB, carry out assessments of the resilience of recognised Tier 2 CCPs to adverse market developments in accordance with Article 32(2) of Regulation (EU) No 1095/2010, in coordination with the assessments referred to in point (b) of Article 24a(7). Central banks of issue referred to in point (f) of Article 25(3) may contribute to such assessments in the carrying out of their monetary policy tasks. In carrying out those assessments, ESMA shall include at least financial and operational risks, and ensure consistency with the assessments of the resilience of Union CCPs carried out pursuant to point (b) of Article 24a(7) of this Regulation.

Article 25 - c Third-country CCP college

1. ESMA shall establish a college for third-country CCPs to facilitate the sharing of information.

2. The college shall consist of:

(a)the Chair of the CCP Supervisory Committee, who shall chair the college;

(b)the two independent members of the CCP Supervisory Committee;

(c)the competent authorities referred to in Article 22; in Member States where more than one authority has been designated as competent in accordance with Article 22, those authorities shall agree on a common representative;

(d)the competent authorities responsible for the supervision of the clearing members established in the Union;

(e)the competent authorities responsible for the supervision of trading venues established in the Union, served or to be served by the CCPs;

(f)the competent authorities supervising central securities depositories established in the Union to which the CCPs are linked or intend to be linked;

(g)the members of the ESCB.

3. The college members may request that the CCP Supervisory Committee discusses specific matters in relation to a CCP established in a third country. Such request shall be made in writing and shall include detailed reasoning for the request. The CCP Supervisory Committee shall duly consider such requests and provide an appropriate response.

4. The establishment and functioning of the college shall be based on a written agreement between all its members. The obligation of professional secrecy in accordance with Article 83 shall apply to all college members.

Article 25 - d Fees

1. ESMA shall charge the following fees to CCPs established in a third country in accordance with this Regulation and in accordance with the delegated act adopted pursuant to paragraph 3:

(a)fees associated with applications for recognition pursuant to Article 25;

(b)annual fees associated with ESMA's tasks in accordance with this Regulation in relation to the CCPs recognised in accordance with Article 25.

2. The fees referred to in paragraph 1 shall be proportionate to the turnover of the CCP concerned and shall cover all costs incurred by ESMA for the recognition and the performance of its tasks in accordance with this Regulation.

3. The Commission shall adopt a delegated act in accordance with Article 82 in order to specify further the following:

(a)the types of fees;

(b)the matters for which fees are due;

(c)the amount of the fees;

(d)the manner in which fees are to be paid by the following:

(i)a CCP which applies for recognition;

(ii)a recognised CCP classified as a Tier 1 CCP in accordance with Article 25(2);

(iii)a recognised CCP classified as a Tier 2 CCP in accordance with Article 25(2b).

Article 25 - e Exercise of the powers referred to in Articles 25f to 25h

The powers conferred on ESMA or any official of or other person authorised by them by Articles 25f to 25h shall not be used to require the disclosure of information or documents which are subject to legal privilege.

Article 25 - f Request for information

1. ESMA may by simple request or by decision require recognised CCPs and related third parties to whom those CCPs have outsourced operational functions or activities to provide all necessary information to enable ESMA to carry out its duties under this Regulation.

2. When sending a simple request for information under paragraph 1, ESMA shall indicate all of the following:

(a)the reference to this Article as the legal basis of the request;

(b)the purpose of the request;

(c)the information required;

(d)the time limit to provide the information;

(e)inform the person from whom the information is requested that there is no obligation to provide the information but that in the case of a voluntary reply to the request the information provided must not be incorrect or misleading;

(f)the fine provided for in Article 25j in conjunction with point (a) of Section V of Annex III, where the answers to questions asked are incorrect or misleading.

3. When requiring that information is provided under paragraph 1 by decision, ESMA shall indicate all of the following:

(a)the reference to this Article as the legal basis of the request;

(b)the purpose of the request;

(c)the information required;

(d)the time limit to provide the information;

(e)the periodic penalty payments provided for in Article 25k where the production of the required information is incomplete;

(f)the fine provided for in Article 25j in conjunction with point (a) of Section V of Annex III, for failing to provide the required information or where the answers to questions asked are incorrect or misleading; and

(g)the right to appeal the decision before ESMA's Board of Appeal and to have the decision reviewed by the Court of Justice of the European Union (“Court of Justice”) in accordance with Articles 60 and 61 of Regulation (EU) No 1095/2010.

4. The persons referred to in paragraph 1 or their representatives and, in the case of legal persons or associations having no legal personality, the persons authorised to represent them by law or by their constitution shall supply the information requested. Lawyers duly authorised to act may supply the information on behalf of their clients. The latter shall remain fully responsible if the information supplied is incomplete, incorrect or misleading.

5. ESMA shall, without delay, send a copy of the simple request or of its decision to the relevant third-country competent authority where the persons referred to in paragraph 1 concerned by the request for information are domiciled or established.

Article 25 - g General investigations

1. In order to carry out its duties under this Regulation, ESMA may conduct necessary investigations of Tier 2 CCPs and related third parties to whom those CCPs have outsourced operational functions, services or activities. To that end, the officials and other persons authorised by ESMA shall be empowered to:

(a)examine any records, data, procedures and any other material relevant to the execution of its tasks irrespective of the medium on which they are stored;

(b)take or obtain certified copies of or extracts from such records, data, procedures and other material;

(c)summon and ask Tier 2 CCPs or their representatives or staff for oral or written explanations on facts or documents relating to the subject matter and purpose of the inspection and to record the answers;

(d)interview any other natural or legal person who consents to be interviewed for the purpose of collecting information relating to the subject matter of an investigation;

(e)request records of telephone and data traffic.

The central banks of issue referred to in point (f) of Article 25(3) may, upon a reasoned request to ESMA, participate in such investigations where those investigations are relevant for the carrying out of their monetary policy tasks.

The third-country CCP college referred to in Article 25c shall be informed without undue delay of any findings that may be relevant for the execution of its tasks.

2. The officials and other persons authorised by ESMA for the purposes of the investigations referred to in paragraph 1 shall exercise their powers upon production of a written authorisation specifying the subject matter and purpose of the investigation. That authorisation shall also indicate the periodic penalty payments provided for in Article 25k where the production of the required records, data, procedures or any other material, or the answers to questions asked to Tier 2 CCPs are not provided or are incomplete, and the fines provided for in Article 25j in conjunction with point (b) of Section V of Annex III, where the answers to questions asked to Tier 2 CCPs are incorrect or misleading.

3. Tier 2 CCPs are required to submit to investigations launched on the basis of a decision of ESMA. The decision shall specify the subject matter and purpose of the investigation, the periodic penalty payments provided for in Article 25k of this Regulation, the legal remedies available under Regulation (EU) No 1095/2010 and the right to have the decision reviewed by the Court of Justice.

4. Prior to notifying a Tier 2 CCP of an investigation, ESMA shall inform the relevant third-country competent authority where the investigation is to be carried out of the investigation and of the identity of the authorised persons. Officials of the third-country competent authority concerned may, upon the request of ESMA, assist those authorised persons in carrying out their duties. Officials of the third-country competent authority concerned may also attend the investigations. Investigations carried out in a third country in accordance with this Article shall be conducted pursuant to the cooperation arrangements established with the relevant third-country competent authority.

Article 25 - h On-site inspections

1. In order to carry out its duties under this Regulation, ESMA may conduct all necessary on-site inspections at any business premises, land or property of Tier 2 CCPs and related third parties to whom those CCPs have outsourced operational functions, services or activities.

The central banks of issue referred to in point (f) of Article 25(3) may submit a reasoned request to ESMA to participate in such on-site inspections where relevant for the carrying out of their monetary policy tasks.

The third-country CCP college referred to in Article 25c shall be informed without undue delay of any findings that may be relevant for the execution of its tasks.

2. The officials and other persons authorised by ESMA to conduct an on-site inspection may enter any business premises, land or property of the legal persons subject to an inspection decision adopted by ESMA and shall have all the powers stipulated in Article 25g(1). They shall also have the power to seal any business premises and books or records for the period of, and to the extent necessary for, the inspection.

3. In sufficient time before the inspection, ESMA shall give notice of the inspection to the relevant third-country competent authority where the inspection is to be conducted. Where the proper conduct and efficiency of the inspection so require, ESMA, after informing the relevant third-country competent authority, may carry out the on-site inspection without prior notice to the CCP. Inspections conducted in a third country in accordance with this Article shall be conducted pursuant to the cooperation arrangements established with the relevant third-country competent authority.

The officials and other persons authorised by ESMA to conduct an on-site inspection shall exercise their powers upon production of a written authorisation specifying the subject matter and purpose of the inspection and the periodic penalty payments provided for in Article 25k where the persons concerned do not submit to the inspection.

4. Tier 2 CCPs shall submit to on-site inspections ordered by decision of ESMA. The decision shall specify the subject matter and purpose of the inspection, appoint the date on which it is to begin and indicate the periodic penalty payments provided for in Article 25k, the legal remedies available under Regulation (EU) No 1095/2010 as well as the right to have the decision reviewed by the Court of Justice.

5. Officials of, as well as those authorised or appointed by, the competent authority of the third country where the inspection is to be conducted may, at the request of ESMA, actively assist the officials and other persons authorised by ESMA. Officials of the relevant third-country competent authority may also attend the on-site inspections.

6. ESMA may also request third-country competent authorities to carry out specific investigatory tasks and on-site inspections as provided for in this Article and in Article 25g(1) on its behalf.

7. Where the officials and other accompanying persons authorised by ESMA find that a person opposes an inspection ordered pursuant to this Article, ESMA may request the third-country competent authority concerned to afford them the necessary assistance, including, where appropriate, the assistance of the police or of an equivalent enforcement authority, to enable them to conduct their on-site inspection.

Article 25 - i Procedural rules for taking supervisory measures and imposing fines

1. Where, in carrying out its duties under this Regulation, ESMA finds that there are serious indications of the possible existence of facts liable to constitute one or more of the infringements listed in Annex III, ESMA shall appoint an independent investigation officer within ESMA to investigate the matter. The appointed officer shall not be involved or have been directly or indirectly involved in the recognition or supervision process of the CCP concerned and shall perform his or her functions independently from ESMA.

2. The investigation officer shall investigate the alleged infringements, taking into account any comments submitted by the persons who are subject to the investigations, and shall submit a complete file with his or her findings to ESMA.

In order to carry out his or her tasks, the investigation officer may exercise the power to request information in accordance with Article 25f and to conduct investigations and on-site inspections in accordance with Articles 25g and 25h. When using those powers, the investigation officer shall comply with Article 25e.

Where carrying out his or her tasks, the investigation officer shall have access to all documents and information gathered by ESMA in its activities.

3. Upon completion of his or her investigation and before submitting the file with his or her findings to ESMA, the investigation officer shall give the persons subject to the investigations the opportunity to be heard on the matters being investigated. The investigation officer shall base his or her findings only on facts on which the persons concerned have had the opportunity to comment.

The rights of the defence of the persons concerned shall be fully respected during investigations under this Article.

4. When submitting the file with his or her findings to ESMA, the investigation officer shall notify that fact to the persons who are subject to the investigations. The persons subject to the investigations shall be entitled to have access to the file, subject to the legitimate interest of other persons in the protection of their business secrets. The right of access to the file shall not extend to confidential information or ESMA's internal preparatory documents.

5. On the basis of the file containing the investigation officer's findings and, when requested by the persons concerned, after having heard the persons subject to the investigations in accordance with Article 25l, ESMA shall decide if one or more of the infringements listed in Annex III have been committed by the persons who have been subject to the investigations and, in such a case, shall take a supervisory measure in accordance with Article 25q and impose a fine in accordance with Article 25j.

6. The investigation officer shall not participate in ESMA's deliberations or in any other way intervene in ESMA's decision-making process.

7. The Commission shall adopt delegated acts in accordance with Article 82 to specify further the rules of procedure for the exercise of the power to impose fines or periodic penalty payments, including provisions on the rights of the defence, temporal provisions, and the collection of fines or periodic penalty payments, and the limitation periods for the imposition and enforcement of penalties.

8. ESMA shall refer matters to the appropriate authorities for investigation and possible criminal prosecution where, in carrying out its duties under this Regulation, it finds that there are serious indications of the possible existence of facts that it knows to be liable to constitute a criminal offence under the applicable third-country legal framework. In addition, ESMA shall refrain from imposing fines or periodic penalty payments where it is aware that a prior acquittal or conviction arising from identical fact or facts which are substantially the same has already acquired the force of res judicata as the result of criminal proceedings under national law.

Article 25 - j Fines

1. Where, in accordance with Article 25i(5), ESMA finds that a CCP has, intentionally or negligently, committed one of the infringements listed in Annex III, it shall adopt a decision imposing a fine in accordance with paragraph 2 of this Article.

An infringement by a CCP shall be considered to have been committed intentionally if ESMA finds objective factors which demonstrate that the CCP or its senior management acted deliberately to commit the infringement.

2. The basic amounts of the fines referred to in paragraph 1 shall be up to twice the amount of the profits gained or losses avoided because of the breach where those can be determined, or up to 10 % of the total annual turnover, as defined in relevant Union law, of a legal person in the preceding business year.

3. The basic amounts set out in paragraph 2 shall be adjusted, if need be, by taking into account aggravating or mitigating factors in accordance with the relevant coefficients set out in Annex IV.

The relevant aggravating coefficients shall be applied one by one to the basic amount. If more than one aggravating coefficient is applicable, the difference between the basic amount and the amount resulting from the application of each individual aggravating coefficient shall be added to the basic amount.

The relevant mitigating coefficients shall be applied one by one to the basic amount. If more than one mitigating coefficient is applicable, the difference between the basic amount and the amount resulting from the application of each individual mitigating coefficient shall be subtracted from the basic amount.

4. Notwithstanding paragraphs 2 and 3, the amount of the fine shall not exceed 20 % of the annual turnover of the CCP concerned in the preceding business year but, where the CCP has directly or indirectly benefited financially from the infringement, the amount of the fine shall be at least equal to that benefit.

Where an act or omission of a CCP constitutes more than one infringement listed in Annex III, only the higher fine calculated in accordance with paragraphs 2 and 3 and relating to one of those infringements shall apply.

Article 25 - k Periodic penalty payments

1. ESMA shall, by decision, impose periodic penalty payments in order to compel:

(a)a Tier 2 CCP to put an end to an infringement in accordance with a decision taken pursuant to point (a) of Article 25q(1);

(b)a person referred to in Article 25f(1) to supply complete information which has been requested by a decision pursuant to Article 25f;

(c)a Tier 2 CCP:

(i)to submit to an investigation and in particular to produce complete records, data, procedures or any other material required and to complete and correct other information provided in an investigation launched by a decision pursuant to Article 25g; or

(ii)to submit to an on-site inspection ordered by a decision taken pursuant to Article 25h.

2. A periodic penalty payment shall be effective and proportionate. The periodic penalty payment shall be imposed for each day of delay.

3. Notwithstanding paragraph 2, the amount of the periodic penalty payments shall be 3 % of the average daily turnover in the preceding business year, or, in the case of natural persons, 2 % of the average daily income in the preceding calendar year. It shall be calculated from the date stipulated in the decision imposing the periodic penalty payment.

4. A periodic penalty payment shall be imposed for a maximum period of six months following the notification of ESMA's decision. Following the end of that period, ESMA shall review the measure.

Article 25 - l Hearing of the persons concerned

1. Before taking any decision on a fine or periodic penalty payment under Articles 25j and 25k, ESMA shall give the persons subject to the proceedings the opportunity to be heard on its findings. ESMA shall base its decisions only on findings on which the persons subject to the proceedings have had an opportunity to comment.

The first subparagraph of this paragraph shall not apply where urgent action is needed in order to prevent significant and imminent damage to the financial system. In such a case ESMA may adopt an interim decision and shall give the persons concerned the opportunity to be heard as soon as possible after taking its decision.

2. The rights of the defence of the persons subject to the proceedings shall be fully respected in the proceedings. They shall be entitled to have access to ESMA's file, subject to the legitimate interest of other persons in the protection of their business secrets. The right of access to the file shall not extend to confidential information or ESMA's internal preparatory documents.

Article 25 - m Disclosure, nature, enforcement and allocation of fines and periodic penalty payments

1. ESMA shall disclose to the public every fine and periodic penalty payment that has been imposed pursuant to Articles 25j and 25k of this Regulation unless such disclosure to the public would seriously jeopardise the financial markets or cause disproportionate damage to the parties involved. Such disclosure shall not contain personal data within the meaning of Regulation (EC) No 45/2001.

2. Fines and periodic penalty payments imposed pursuant to Articles 25j and 25k shall be of an administrative nature.

3. Where ESMA decides to impose no fines or penalty payments, it shall inform the European Parliament, the Council, the Commission, and the relevant third-country competent authorities accordingly and shall set out the reasons for its decision.

4. Fines and periodic penalty payments imposed pursuant to Articles 25j and 25k shall be enforceable.

Enforcement shall be governed by the rules of civil procedure in force in the Member State or third-country in which it is carried out.

5. The amounts of the fines and periodic penalty payments shall be allocated to the general budget of the European Union.

Article 25 - n Review by the Court of Justice

The Court of Justice shall have unlimited jurisdiction to review decisions whereby ESMA has imposed a fine or a periodic penalty payment. It may annul, reduce or increase the fine or periodic penalty payment imposed.

Article 25 - o Amendments to Annex IV

In order to take account of developments on financial markets the Commission is empowered to adopt delegated acts in accordance with Article 82 concerning measures to amend Annex IV.

Article 25 - p Withdrawal of recognition

1. Without prejudice to Article 25q and subject to the following paragraphs, ESMA, after consulting the authorities and entities referred to in Article 25(3), shall withdraw a recognition decision adopted in accordance with Article 25 where:

(a)the CCP concerned has not made use of the recognition within six months, expressly renounces the recognition or has ceased to engage in business for more than six months;

(b)the CCP concerned has obtained the recognition through false statements or by any other irregular means;

(c)the CCP concerned has seriously and systematically infringed any of the conditions for recognition laid down in Article 25 or no longer complies with any of those conditions and in any of those situations has not taken the remedial action requested by ESMA within an appropriately set timeframe of up to a maximum of six months;

(d)ESMA is unable to exercise effectively its responsibilities under this Regulation over the CCP concerned, due to the failure of the third-country authority of the CCP to provide ESMA with all relevant information or cooperate with ESMA in accordance with Article 25(7);

(e)the implementing act referred to in Article 25(6) has been withdrawn or suspended, or any of the conditions attached to it is no longer satisfied.

ESMA may limit the withdrawal of the recognition to a particular service, activity or class of financial instruments.

When determining the date of entry into effect of the decision to withdraw the recognition, ESMA shall endeavour to minimise potential market disruption and provide for an appropriate adaptation period which shall not exceed two years.

2. Before withdrawing the recognition in accordance with point (c) of paragraph 1 of this Article, ESMA shall take into account the possibility of applying measures under points (a), (b) and (c) of Article 25q(1).

If ESMA determines that remedial action within the set timeframe of up to a maximum of six months under point (c) of the first subparagraph of paragraph 1 of this Article has not been taken or that the action taken is not appropriate, and after consulting the authorities referred to in Article 25(3), ESMA shall withdraw the recognition decision.

3. ESMA shall, without undue delay, notify the relevant third-country competent authority of a decision to withdraw the recognition of a recognised CCP.

4. Any of the authorities referred to in Article 25(3), which consider that one of the conditions referred to in paragraph 1 has been met, may request ESMA to examine whether the conditions for the withdrawal of the recognition of a recognised CCP or of its recognition for a particular service, activity or class of financial instruments are met. Where ESMA decides not to withdraw the recognition of the CCP concerned, it shall provide full reasons to the requesting authority.

Article 25 - q Supervisory measures by ESMA

1. Where, in accordance with Article 25i(5), ESMA finds that a Tier 2 CCP has committed one of the infringements listed in Annex III, it shall take one or more of the following decisions:

(a)require the CCP to bring the infringement to an end;

(b)impose fines under Article 25j;

(c)issue public notices;

(d)withdraw the recognition of the CCP, or its recognition for a particular service, activity or class of financial instruments, under Article 25p.

2. When taking the decisions referred to in paragraph 1, ESMA shall take into account the nature and seriousness of the infringement, having regard to the following criteria:

(a)the duration and frequency of the infringement;

(b)whether the infringement has revealed serious or systemic weaknesses in the CCP's procedures or in its management systems or internal controls;

(c)whether financial crime has been occasioned, facilitated or otherwise attributable to the infringement;

(d)whether the infringement has been committed intentionally or negligently.

3. Without undue delay, ESMA shall notify any decision adopted pursuant to paragraph 1 to the CCP concerned, and shall communicate it to the relevant third-country competent authorities and to the Commission. It shall publicly disclose any such decision on its website within 10 working days of the date when it was adopted.

When making public its decision as referred to in the first subparagraph, ESMA shall also make public the right of the CCP concerned to appeal the decision, the fact, where relevant, that such an appeal has been lodged, specifying that such an appeal does not have suspensive effect, and the fact that it is possible for ESMA's Board of Appeal to suspend the application of the contested decision in accordance with Article 60(3) of Regulation (EU) No 1095/2010.’;

(12)in Article 32(1), the following subparagraph is added:

‘The assessment of the competent authority concerning the notification provided for in Article 31(2) and the information referred to in Article 31(3), shall be subject to an opinion of the college pursuant to Article 19.’;

(13)in Article 35(1), the last subparagraph is replaced by the following:

‘A CCP shall not outsource major activities linked to risk management unless such outsourcing is approved by the competent authority. The decision of the competent authority shall be subject to an opinion of the college pursuant to Article 19.’;

(14)Article 49 is amended as follows:

(a)paragraph 1 is replaced by the following:

‘1.A CCP shall regularly review the models and parameters adopted to calculate its margin requirements, default fund contributions, collateral requirements and other risk control mechanisms. It shall subject the models to rigorous and frequent stress tests to assess their resilience in extreme but plausible market conditions and shall perform back tests to assess the reliability of the methodology adopted. The CCP shall obtain independent validation, shall inform its competent authority and ESMA of the results of the tests performed and shall obtain their validation in accordance with paragraphs 1a, 1b, 1c, 1d and 1e before adopting any significant change to the models and parameters.

The adopted models and parameters, including any significant change thereto, shall be subject to an opinion of the college in accordance with the following paragraphs.

ESMA shall ensure that information on the results of the stress tests is passed on to the ESAs, the ESCB and the Single Resolution Board to enable them to assess the exposure of financial undertakings to the default of CCPs.’;

(b)the following paragraphs are inserted:

‘1a.Where a CCP intends to adopt any significant change to the models and parameters referred to in paragraph 1, it shall apply to the competent authority and ESMA for validation of that change. The CCP shall enclose an independent validation of the intended change to its applications. The competent authority and ESMA shall each confirm the receipt of the complete application to the CCP.

1b.Within 50 working days of the receipt of the complete applications, the competent authority and ESMA shall each conduct a risk assessment of the significant change and submit their reports to the college established in accordance with Article 18.

1c.Within 30 working days of the receipt of the reports referred to in paragraph 1b, the college shall adopt a majority opinion in accordance with Article 19(3). Notwithstanding a provisional adoption in accordance with paragraph 1e, the competent authority shall not adopt a decision granting or refusing the validation of significant changes to models and parameters until such an opinion has been adopted by the college, unless the college has not adopted that opinion within the deadline.

1d.Within 90 working days of the receipt of the applications referred to in paragraph 1a, the competent authority and ESMA shall each inform the CCP and each other in writing, including a fully reasoned explanation, whether the validation has been granted or refused.

1e.The CCP may not adopt any significant change to the models and parameters referred to in paragraph 1 before obtaining the validations by its competent authority and ESMA. The competent authority, in agreement with ESMA, may allow for a provisional adoption of a significant change of those models or parameters prior to their validations where duly justified.’;

(c)the following paragraph is added:

‘5.To ensure uniform conditions of application of this Article, ESMA shall, after consulting EBA, other relevant competent authorities and the members of the ESCB, develop draft regulatory technical standards specifying the conditions under which changes to the models and parameters referred to in paragraph 1 are significant.

ESMA shall submit those draft regulatory technical standards to the Commission by 2 January 2021.

Power is delegated to the Commission to adopt the regulatory technical standards referred to in the first subparagraph in accordance with Articles 10 to 14 of Regulation (EU) No 1095/2010.’;

(15)Article 82 is amended as follows:

(a)paragraphs 2, 3 and 4 are replaced by the following:

‘2.The power to adopt delegated acts referred to in Articles 1(6), Article 4(3a), Article 25(2a), Article 25(6a), Article 25a(3), Article 25d(3), Article 25i(7), Article 25o, Article 64(7), Article 70, Article 72(3), and Article 85(2) shall be conferred to the Commission for an indeterminate period of time.

3.The delegation of power referred to in Article 1(6), Article 4(3a), Article 25(2a), Article 25(6a), Article 25a(3), Article 25d(3), Article 25i(7), Article 25o, Article 64(7), Article 70, Article 72(3) and Article 85(2) may be revoked at any time by the European Parliament or by the Council. A decision to revoke shall put an end to the delegation of the power specified in that decision. It shall take effect the day following the publication of the decision in the Official Journal of the European Union or at a later date specified therein. It shall not affect the validity of any delegated acts already in force.

4.Before adopting a delegated act, the Commission shall endeavour to consult ESMA and shall consult experts designated by each Member State in accordance with the principles laid down in the Interinstitutional Agreement of 13 April 2016 on Better Law-Making.’;

(b)paragraph 6 is replaced by the following:

‘6.A delegated act adopted pursuant to Article 1(6), Article 4(3a), Article 25(2a), Article 25(6a), Article 25a(3), Article 25d(3), Article 25i(7), Article 25o, Article 64(7), Article 70, Article 72(3) and Article 85(2) shall enter into force only if no objection has been expressed either by the European Parliament or the Council within a period of three months of notification of that act to the European Parliament and the Council or if, before the expiry of that period, the European Parliament and the Council have both informed the Commission that they will not object. That period shall be extended by three months at the initiative of the European Parliament or of the Council.’;

(16)in Article 85 the following paragraphs are added:

‘6.ESMA shall, in cooperation with the ESRB and in agreement with, in accordance with Article 24b(3), the central banks of issue of all Union currencies of the financial instruments cleared or to be cleared by the third-country CCP to which the implementing act referred to in the second subparagraph of Article 25(2c) is addressed, submit a report to the Commission on the application of the provisions of that implementing act, in particular assessing whether the financial stability risk for the Union or for one or more of its Member States is sufficiently mitigated. ESMA shall submit its report to the Commission within 12 months of the end of the adaptation period determined in accordance with point (b) of the fourth subparagraph of Article 25(2c). The agreement of a central bank of issue shall only relate to the currency it issues and not to the report as a whole.

Within 12 months of transmission of the report referred to in the first subparagraph, the Commission shall prepare a report on the application of the provisions of that implementing act. The Commission shall submit its report to the European Parliament and to the Council, together with any appropriate proposals.

7.By 2 January 2023, the Commission shall prepare a report assessing the effectiveness of:
(a)ESMA's tasks, in particular the CCP Supervisory Committee's, in fostering the convergence and coherence of the application of this Regulation among the competent authorities referred to in Article 22 and the colleges referred to in Article 18;

(b)the framework for the recognition and supervision of third-country CCPs;

(c)the framework for guaranteeing a level playing field among CCPs authorised in accordance with Article 14 as well as among authorised CCPs and third-country CCPs recognised in accordance with Article 25;

(d)the division of responsibilities between ESMA, the competent authorities and the central banks of issue.

The Commission shall submit the report to the European Parliament and the Council together with any appropriate proposals.’;

(17)in Article 89, the following paragraphs are inserted:

‘3a.ESMA shall not exercise its powers pursuant to Article 25(2a), (2b) and (2c) until the date of entry into force of the delegated acts referred to in the second subparagraph of Article 25(2a) and in Article 25a(3) and, in relation to CCPs for which ESMA has not adopted a recognition decision pursuant to Article 25 before 1 January 2020, until the date of entry into force of the relevant implementing act referred to in Article 25(6).

3b.ESMA shall establish and manage a college pursuant to Article 25c for all CCPs recognised in accordance with Article 25 before 1 January 2020 within four months from the date of entry into force of the delegated act referred to in the second subparagraph of Article 25(2a).

3c.ESMA shall review the recognition decisions adopted pursuant to Article 25(1) before the date of entry into force of the delegated acts referred to in the second subparagraph of Article 25(2a) and in Article 25a(3) within 18 months from the date of entry into force of the delegated act referred to in the second subparagraph of Article 25(2a), in accordance with Article 25(5).

Where, following the review referred to in the first subparagraph of this paragraph, ESMA determines that a CCP recognised before 1 January 2020 should be classified as a Tier 2 CCP in accordance with Article 25(2a), ESMA shall set an appropriate adaptation period which shall not exceed 18 months within which the CCP must comply with the requirements referred to in Article 25(2b). ESMA may extend the adaptation period up to an additional six months upon the reasoned request of the CCP or any of the competent authorities responsible for the supervision of clearing members established in the Union, where such extension is justified by exceptional circumstances and by the impact on the clearing members established in the Union.’;

(18)Article 90 is replaced by the following:

‘Article 90

Staff and resources of ESMA

By 2 January 2022, ESMA shall assess the staffing and resources needs arising from the assumption of its powers and duties in accordance with this Regulation and submit a report to the European Parliament, the Council and the Commission.’;

(19)The texts set out in the Annex to this Regulation are added as Annexes III and IV.

Article 2

This Regulation shall enter into force on the twentieth day following that of its publication in the Official Journal of the European Union.

This Regulation shall be binding in its entirety and directly applicable in all Member States.