Regulation 2019/2099 - Amendment of Regulation (EU) No 648/2012 as regards the procedures and authorities involved for the authorisation of CCPs and requirements for the recognition of third-country CCPs - Main contents

EN

Official Journal of the European Union

L 322/1

Regulation (EU) No 648/2012 of the European Parliament and of the Council (4) requires standardised OTC derivatives contracts to be cleared through a central counterparty (CCP) in line with similar requirements in other G20 countries. That Regulation also introduced strict prudential, organisational and business conduct requirements for CCPs and established arrangements for their prudential supervision in order to minimise risks to users of CCPs and underpin financial stability.

Since the adoption of Regulation (EU) No 648/2012, the volume of CCP activity in the Union and globally has grown rapidly in scale and in scope. The expansion in CCP activity is set to continue in the coming years with the introduction of additional clearing obligations and the rise in voluntary clearing by counterparties not subject to a clearing obligation. Regulation (EU) 2019/834 of the European Parliament and of the Council (5) amends Regulation (EU) No 648/2012 in a targeted manner, improves its effectiveness and proportionality, creates further incentives for CCPs to offer central clearing of derivatives to counterparties, and facilitates access to clearing for small financial and non-financial counterparties. Deeper and more integrated capital markets resulting from the Capital Markets Union (CMU) will further increase the need for cross-border clearing in the Union, thus further increasing the importance and the interconnectedness of CCPs within the financial system.

The number of CCPs currently established in the Union and authorised under Regulation (EU) No 648/2012 remains relatively limited, standing at 16 in August 2019. 33 third-country CCPs have been recognised by the European Securities and Markets Authority (ESMA) under that Regulation, allowing them to offer their services to clearing members and trading venues established in the Union. Clearing markets are well integrated across the Union but highly concentrated in certain asset classes and highly interconnected. The concentration of risk makes the failure of a CCP a low-probability but a potentially extremely high-impact event. In line with the G20 consensus, the Commission adopted a proposal for a Regulation on recovery and resolution of CCPs in November 2016 to ensure that authorities are appropriately prepared to address a failing CCP, safeguarding financial stability and limiting taxpayer costs.

Notwithstanding that legislative proposal and in light of the growing size, complexity and cross-border dimension of clearing in the Union and globally, the supervisory arrangements for Union and third-country CCPs should be revisited. By addressing identified problems at an early stage and establishing clear and coherent supervisory arrangements both for Union and third-country CCPs, the overall stability of the Union financial system would be reinforced and the potential risk of a CCP failure should be lowered even further.

In light of those considerations, the Commission adopted a Communication on 4 May 2017 on responding to challenges for critical financial market infrastructures and further developing the CMU, stating that further changes to Regulation (EU) No 648/2012 are necessary to improve the current framework that ensures financial stability and supports the further development and deepening of the CMU.

The supervisory arrangements under Regulation (EU) No 648/2012 rely mainly on the home-country authority. CCPs established in the Union are currently authorised and supervised by competent authorities of the Member States in cooperation with colleges comprising of national supervisors, ESMA, relevant members of the European System of Central Banks (ESCB), and other relevant authorities. The colleges rely on coordination and information sharing by the CCP's competent authority which bears the responsibility of enforcing the provisions laid out in Regulation (EU) No 648/2012. Diverging supervisory practices for CCPs across the Union can create risks of regulatory and supervisory arbitrage, jeopardising financial stability and resulting in unhealthy competition. The Commission has drawn attention to those emerging risks and the need for greater supervisory convergence in its Communication on CMU of 14 September 2016 and in the public consultation on the operations of the European Supervisory Authorities (ESAs). Within the already existing general remit of ESMA to 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, ESMA should in particular focus on supervisory areas which have a cross-border dimension or a possible cross-border impact. ESMA should determine the supervisory areas which have a cross-border dimension or a possible cross-border impact based on its expertise and experience in the application of Regulation (EU) No 648/2012.

In view of the global nature of financial markets and of the need to address inconsistencies in the supervision of Union and third-country CCPs, ESMA's ability to promote convergence in the supervision of CCPs should be enhanced. For that purpose, a permanent internal committee for CCPs (‘CCP Supervisory Committee’) should be created to handle tasks related to CCPs authorised within the Union and third-country CCPs. The establishment, the functions and composition of the CCP Supervisory Committee set up within ESMA should be a unique solution to bring together expertise in the field of CCP supervision and should not constitute a precedent for the ESAs.

The CCP Supervisory Committee should be responsible for specific tasks assigned to it pursuant to Regulation (EU) No 648/2012 to ensure the proper functioning of the internal market as well as the financial stability of the Union and its Member States.

In order to include the full range of practical experience and operational expertise regarding the supervision of CCPs, the CCP Supervisory Committee should be composed of a Chair, independent members, and the competent authorities of Member States with an authorised CCP. Where the CCP Supervisory Committee convenes in relation to authorised CCPs, central banks of issue of the Union currencies of the financial instruments cleared by those CCPs should be able to, on a voluntary basis, participate in the CCP Supervisory Committee in relation to the areas of Union-wide assessments of the resilience of CCPs to adverse market developments and relevant market developments, to facilitate access to information that could be relevant for carrying out their tasks. Where the CCP Supervisory Committee convenes in relation to third-country CCPs, central banks of issue of all Union currencies of the financial instruments cleared or to be cleared by the respective third-country CCP should be able to, on a voluntary basis, participate in the CCP Supervisory Committee for preparation of decisions in relation to third-country CCPs that are 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 CCPs). Central banks of issue should be non-voting members of the CCP Supervisory Committee. The Chair of the CCP Supervisory Committee should be able to invite members of colleges as observers to ensure that the views of other relevant authorities are taken into account by the CCP Supervisory Committee.

To provide for an appropriate level of expertise and accountability, the Chair and the independent members of the CCP Supervisory Committee should be appointed by ESMA's Board of Supervisors (‘the Board of Supervisors’) on the basis of merit, knowledge of clearing, post-trading, prudential supervision, and financial matters, as well as experience relevant to the supervision and regulation of CCPs, following an open selection procedure organised and managed by the Board of Supervisors, assisted by the Commission, which should respect the principle of gender balance. Before the appointment of the Chair and the independent members of the CCP Supervisory Committee, and up to one month after their selection by the Board of Supervisors, the European Parliament should, after having heard the persons selected, approve or reject their designation. Only selected candidates approved by the European Parliament may be appointed by the Board of Supervisors.

In order to ensure transparency and democratic control, as well as to safeguard the rights of the Union institutions, the Chair and the independent members of the CCP Supervisory Committee should be accountable to the European Parliament and to the Council for any decisions taken on the basis of Regulation (EU) No 648/2012.

The Chair and the independent members of the CCP Supervisory Committee should act independently and objectively in the interest of the Union. They should ensure that appropriate account is taken of the proper functioning of the internal market as well as financial stability in each Member State, with or without authorised CCPs, and in the Union.

In order to ensure an appropriate, effective and swift decision-making process in the CCP Supervisory Committee, the Chair, the independent members, and the competent authorities of the Member States with an authorised CCP should have voting rights. The representatives of the central bank(s), as well as observers, should have no voting rights. The CCP Supervisory Committee should take its decisions by a simple majority of its members, each voting member should have one vote and the Chair should have a casting vote in the event of a tie. The final decision-making power should remain with the Board of Supervisors.

In order to ensure a coherent and consistent supervisory approach within the Union, the CCP Supervisory Committee should be responsible for preparing certain specific decisions and carrying out certain tasks which are entrusted to ESMA. Such responsibilities strengthen ESMA's coordination role between competent authorities and across colleges with a view to building a common supervisory culture and consistent supervisory practices, especially with regard to supervisory areas which have a cross-border dimension or a possible cross-border impact. In that respect, such relevant supervisory activities and decisions could include in particular supervisory areas where diverging supervisory practices can create risks of regulatory and supervisory arbitrage or jeopardise financial stability. ESMA should also be informed of all opinions adopted by colleges provided for in Regulation (EU) No 648/2012, including the basis of decision-making which the opinion of the college relates to and any recommendations adhered to in those opinions by the college.

In addition, a mandatory ex ante exchange and discussion regarding draft decisions of competent authorities of CCPs on certain supervisory areas of particular importance should take place within the CCP Supervisory Committee. Moreover, on a voluntary basis and on the initiative of the competent authorities of CCPs, all draft decisions should be able to be subject to an exchange on an ex ante basis. ESMA should not provide an opinion where, as a result of the outcome of the discussion within the CCP Supervisory Committee, no diverging views have been identified. The power for ESMA to provide opinions should ensure that the CCP's competent authority receives an additional reaction regarding draft decisions by a group of supervisors specialised and experienced in the supervision of CCPs. Such opinions by ESMA should not have any implication for the responsibility of the CCP's competent authority to take the final decision, which means that the final content of the respective decision would remain at the full discretion of the CCP's competent authority. Where the competent authority does not agree with an opinion of ESMA, it should provide comments to ESMA on any significant deviation from that opinion. The competent authority should be able to provide comments before, at the same time as, or after adopting a decision. However, where the competent authority provides comments after adopting a decision, it should do so without undue delay. The opinion provided by ESMA should not interfere with the power of colleges to determine the content of their opinion at their own discretion, where applicable.

Where supervisory activities in relation to authorised CCPs show a lack of convergence and coherence in the application of Regulation (EU) No 648/2012, including on the basis of mandatory and voluntary consultation of ESMA by competent authorities and the discussions in the CCP Supervisory Committee, ESMA should promote the necessary degree of convergence and consistency, including by issuing guidelines, recommendations or opinions. To facilitate that process, the CCP Supervisory Committee should be able to request that the Board of Supervisors consider the adoption of guidelines, recommendations and opinions by ESMA. The CCP Supervisory Committee should also be able to submit opinions to the Board of Supervisors regarding decisions to be taken by ESMA concerning the tasks and activities of CCP competent authorities. The CCP Supervisory Committee should provide, for instance, opinions on draft technical standards or draft guidelines developed by ESMA in the area of authorisation and supervision of CCPs.

To provide effective supervision in relation to third-country CCPs, the CCP Supervisory Committee should prepare complete draft decisions for approval by the Board of Supervisors and carry out the tasks entrusted to ESMA with regard to the provisions concerning the recognition and supervision of third-country CCPs laid down in Regulation (EU) No 648/2012. As cooperation and information are essential, the CCP Supervisory Committee should, when it convenes in relation to third-country CCPs, share with the third-country CCP college relevant information, including the complete draft decisions it submits to the Board of Supervisors, final decisions adopted by the Board of Supervisors, agendas and minutes of the meetings of the CCP Supervisory Committee and applications for recognition by CCPs established in a third country.

In order to ensure the effective performance of its tasks, the CCP Supervisory Committee should be supported by dedicated staff from ESMA to prepare its meetings, prepare the analyses necessary to carry out its tasks and support it in its international cooperation.

Central banks of issue should be involved in the preparation of decisions by the CCP Supervisory Committee in relation to the classification of third-country CCPs according to their systemic importance and the supervision of Tier 2 CCPs in order to ensure the proper exercise of their tasks related to the monetary policy and the smooth operation of payment systems. As decisions by ESMA in relation to Tier 2 CCPs on margin requirements, liquidity risk control, collateral, settlement and approval of interoperability arrangements could be of particular relevance for central banks' tasks, the CCP Supervisory Committee should consult central banks of issue of all Union currencies of the financial instruments cleared or to be cleared by third-country CCPs on the basis of a ‘comply or explain’ mechanism.

The Board of Supervisors should adopt the draft decisions submitted by the CCP Supervisory Committee, acting in accordance with the decision-making process set out in Regulation (EU) No 1095/2010 of the European Parliament and of the Council (6). In order to ensure an effective and swift decision-making process, certain decisions which do not relate to the recognition, classification of third-country CCPs, specific requirements imposed on Tier 2 CCPs, review or withdrawal of recognition or to the essential elements of the ongoing supervision of third-country CCPs, where consultation with the central banks of issue is required, should be adopted by the Board of Supervisors within three working days.

To further promote convergence on supervisory decisions, ESMA should receive new mandates to develop draft regulatory technical standards on the extension of activities and services and in order to specify the conditions under which changes to the models and parameters are considered to be significant. Furthermore, ESMA should issue necessary guidelines to specify further the common procedures for the supervisory review and evaluation process in relation to CCPs.

The functioning of the colleges set up for Union CCPs is crucial for effective supervision of CCPs. In order to ensure Union-wide coherence of the processes within colleges, the written agreements determining the practical arrangements for the functioning of colleges should be refined and more standardised. To further promote the role of the members of colleges, they should be entitled to contribute to the agenda-setting of college meetings. To increase the transparency of colleges, their composition should be public. In order to avoid any conflicts of interest, Council Regulation (EU) No 1024/2013 (7) stipulates that the supervisory tasks of the ECB and tasks relating to the monetary policy and any other of its tasks should be carried out in full separation. That specific separation of responsibilities of the ECB should be acknowledged. Accordingly, where the ECB is a member of a college set up for a Union CCP due to its function as a competent authority of a clearing member within the Single Supervisory Mechanism as well as due to its function as a central bank of issue representing the Eurosystem, the ECB should be vested with two votes in the college.

The number of central banks of issue and competent authorities responsible for the supervision of clearing members of the Member States represented in colleges set up for Union CCPs is currently limited. To facilitate access to information by a broader range of central banks of issue and competent authorities of other Member States, whose financial stability could be impacted by a CCP's financial distress, additional central banks of issue and competent authorities should be able to participate in colleges on request. To promote consistency in the supervision of CCPs across the Union, the Chair, or an independent member, of the CCP Supervisory Committee should also participate in colleges. In order to ensure an appropriate, effective and swift decision-making process, central banks of issue and competent authorities, which are participating on the basis of a request, as well as the Chair, or the independent member, of the CCP Supervisory Committee should be non-voting.

In order to strengthen their role, colleges should be able to provide opinions on additional supervisory areas of fundamental impact on a CCP's business operations, including on the assessment of shareholders and members with qualifying holdings of CCPs and the outsourcing of operational functions, services or activities. In addition, following a request by any member of the college, the college should be able to include in its opinions recommendations aimed at addressing shortcomings in a CCP's risk management and increasing its resilience, subject to a majority decision of the college. The vote of the college on the inclusion of such recommendations should be carried out separately from the vote of the college on the opinion. In order to reinforce the impact of college opinions and recommendations, the competent authorities should duly consider them and provide reasoning in cases of significant deviation from those opinions or recommendations.

The supervisory arrangements in Regulation (EU) No 648/2012 for third-country CCPs offering clearing services within the Union also require revision. Access to information, the ability to conduct on-site inspections and investigations, the possibility to share information on third-country CCPs between relevant Union and Member States' authorities as well as the possibility to enforce ESMA's decisions over third-country CCPs need to be improved to avoid important financial stability implications for Union entities. There is also a risk that changes to third-country CCP rules or to a third-country regulatory framework cannot be taken into account and could negatively affect the regulatory or supervisory outcomes leading to an unlevel playing field between Union and third-country CCPs.

A significant amount of financial instruments denominated in Union currencies are cleared by third-country CCPs. This implies significant challenges for Union and Member States' authorities in safeguarding financial stability.

As part of its commitment to integrated financial markets, the Commission should continue to determine, by way of equivalence decisions, that the legal and supervisory frameworks of third countries fulfil the requirements of Regulation (EU) No 648/2012. In order to enhance the implementation of the current equivalence regime in relation to CCPs, the Commission should be able to, if necessary, specify further the criteria for assessing the equivalence of third-country CCP regimes. It is also necessary to empower ESMA with the monitoring of regulatory and supervisory developments in those third-country CCP regimes that have been deemed equivalent by the Commission. This is in order to ensure that the equivalence criteria and any specific conditions set for their use continue to be satisfied by third countries. ESMA should report its findings to the European Parliament, the Council, the Commission and the third-country CCP college on a confidential basis.

The Commission is currently able to amend, suspend, review or revoke an equivalence decision at any time, in particular where developments occur in a third country which materially affect the elements assessed in accordance with the equivalence requirements under Regulation (EU) No 648/2012. Where a third country's relevant authorities no longer cooperate with ESMA or other Union supervisors in good faith or fail to comply on a continuous basis with the applicable equivalence requirements, the Commission is also able to, inter alia, put those authorities on notice or publish a specific recommendation. Where the Commission decides at any time to revoke an equivalence decision, it is able to delay the date of application of that decision in order to address the risks to financial stability or of market disruptions. In addition to those powers currently available, the Commission should also be able to set specific conditions to ensure that the equivalence criteria continue to be fulfilled on an ongoing basis by the third country to which an equivalence decision relates. The Commission should also be able to set conditions ensuring that ESMA is able to effectively exercise its responsibilities in relation to third-country CCPs recognised under Regulation (EU) No 648/2012 or in relation to monitoring of regulatory and supervisory developments in third countries that are of relevance for adopted equivalence decisions.

In view of the growing cross-border dimension of CCPs and of the interlinkages in the Union financial system, it is necessary to improve the ability of the Union to identify, monitor and mitigate the potential risks related to third-country CCPs. The role of ESMA should therefore be enhanced to effectively supervise third-country CCPs that apply for recognition to provide clearing services in the Union. The involvement of the Union central banks of issue in the recognition, supervision, review of recognition and withdrawal of recognition of third-country CCPs that are active in the currency they issue should also be improved. Therefore, Union central banks of issue should be consulted on certain aspects affecting their monetary policy responsibilities in relation to financial instruments denominated in Union currencies which are cleared or to be cleared by CCPs located outside the Union.

Once the Commission has determined the legal and supervisory framework of a third country as equivalent to the Union framework, the process to recognise CCPs from that third country should take into account the risks those CCPs present for the financial stability of the Union or of one or more of its Member States.

When considering the application of a third-country CCP for recognition, ESMA should assess the degree of systemic risk that the CCP presents to the financial stability of the Union or of one or more of its Member States on the basis of objective and transparent criteria set out in this Regulation. Those criteria should contribute to the overall assessment. Individually, none of those criteria should be considered determinative on its own. Where assessing the risk profile of a third-country CCP, ESMA should consider all risks, including operational risks, such as fraud, criminal activity, IT- and cyber-risk. A Commission delegated act should specify further those criteria. In specifying those criteria, the nature of the transactions cleared by the CCP, including their complexity, price volatility and average maturity, as well as the transparency and liquidity of the markets concerned and the degree to which the CCP's clearing activities are denominated in euro or other Union currencies should be considered. In that regard, specific features concerning certain agricultural derivative contracts listed and executed on regulated markets in third countries, which relate to markets that largely serve domestic non-financial counterparties in that third country which manage their commercial risks through those contracts, may pose a negligible risk to clearing members and trading venues in the Union as they have a low degree of systemic interconnectedness with the rest of the financial system. Where a framework for the recovery and resolution of CCPs is in force in a third country, that should also be taken into account by ESMA in its analysis of the degree of systemic risk that the applicant CCP established in that third country presents to the financial stability of the Union or of one or more of its Member States.

CCPs that are not systemically important to the financial stability of the Union or of one or more of its Member States should be considered as ‘Tier 1’ CCPs. CCPs that are systemically important or likely to become systemically important for the financial stability of the Union or of one or more of its Member States should be considered as ‘Tier 2’ CCPs. Where ESMA determines that a third-country CCP is not systemically important for the financial stability of the Union or of one or more of its Member States, the existing recognition conditions under Regulation (EU) No 648/2012 should apply to that CCP. Where ESMA determines that a third-country CCP is systemically important, specific requirements should be imposed on that CCP. ESMA should only recognise such a CCP where that CCP complies with those requirements. Those requirements should include certain prudential requirements set out in Regulation (EU) No 648/2012 that aim to increase the safety and efficiency of a CCP. ESMA should be directly responsible for ensuring that a systemically important third-country CCP complies with those requirements. Related requirements should also enable ESMA to carry out full and effective supervision of that CCP under Regulation (EU) No 648/2012.

In order to ensure the proper involvement of central bank(s) of issue of all Union currencies of the financial instruments cleared or to be cleared by third-country CCPs in the recognition of Tier 2 CCPs, ESMA, when recognising such CCPs, should take into account their compliance with specific requirements that those central banks of issue may have imposed in the carrying out of their monetary policy tasks. Those requirements should relate to the submission of information to the central bank(s) of issue upon its reasoned request, the cooperation of CCPs with the central bank(s) of issue in the context of the assessment of the CCP's resilience to adverse market developments carried out by ESMA, the opening of an overnight deposit account with the central bank(s) of issue and requirements in exceptional situations that the central bank(s) of issue considers necessary. The access criteria and requirements of central bank(s) of issue for opening an overnight deposit account should not amount to an obligation to relocate all or part of the clearing services of the CCP.

As regards requirements that central bank(s) of issue might be able to impose in exceptional situations, the transmission of monetary policy or the smooth operation of payment systems might be affected by developments in centrally cleared markets in situations such as stresses in the markets (especially the money and repurchase markets) on which the CCP relies to obtain liquidity, situations where CCPs' operations contribute to the drying up of liquidity in the market, or serious malfunctions of payment or settlement arrangements that impede the CCP's ability to meet its payment obligations or increase its liquidity needs. The determination of the existence of such exceptional situations depends solely on monetary policy considerations and need not coincide with any emergency situation relating to the CCP. In such situations, the prudential framework might therefore not fully mitigate the ensuing risks, in which case direct action by the central bank(s) of issue to ensure the transmission of monetary policy or the smooth operation of payment systems might be necessary.

In such exceptional situations, central banks of issue might need to impose, to the extent allowed under their respective institutional frameworks, temporary requirements relating to liquidity risks, settlement arrangements, margin requirements, collateral or interoperability arrangements. Non-compliance with such temporary requirements might trigger the withdrawal by ESMA of the recognition of the Tier 2 CCP. Those requirements could include, in particular, temporary enhancements to the liquidity risk management of a Tier 2 CCP, such as increase in liquidity buffer, increase in the frequency of the collection of intraday margins, and limits to cross-currency exposures, or specific arrangements for depositing cash and settling payments in the currency of the central bank. The requirements should not extend to other areas of prudential supervision or amount automatically to withdrawal of recognition. Furthermore, the application of those requirements should only be a condition for recognition for a limited period of time of up to six months with a potential extension once to an additional period not exceeding six months. After expiration of this additional period, the application of those requirements should cease to be a condition for the recognition of a Tier 2 CCP. Nevertheless, in the context of a new or different exceptional situation, central banks of issue should not be prevented from imposing temporary requirements, the application of which would be a condition for the recognition of a Tier 2 CCP under Regulation (EU) No 648/2012.

Before the application of the requirements or before a possible extension, a central bank of issue should provide ESMA, the other central banks of issue of all Union currencies of the financial instruments cleared or to be cleared, and the members of the third-country CCP college 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 while adequately respecting the need to protect confidential or sensitive information. In order to avoid duplication, the central bank of issue should cooperate and share information on a continuous basis with ESMA and with the other central banks of issue of all Union currencies of the financial instruments cleared or to be cleared in relation to the temporary requirements applicable in exceptional situations.

Central bank(s) of issue should provide ESMA with confirmation whether or not a Tier 2 CCP complies with any additional requirements as quickly as possible and in any case within 30 working days of the determination that a third-country CCP is not a Tier 1 CCP or, within 90 working days of the imposition of additional requirements where those requirements have been imposed after a Tier 2 CCP has been recognised.

The degree of risk posed by a systemically-important CCP to the financial system and stability of the Union varies. The requirements for systemically-important CCPs should therefore be applied in a manner proportionate to the risks that the CCP might present to the Union. Where ESMA, after consulting the European Systemic Risk Board (ESRB), and in agreement with the central banks of issue of all Union currencies of the financial instruments cleared or to be cleared by a third-country CCP, concludes, on the basis of a fully reasoned assessment, including a quantitative technical assessment of the costs and benefits, that a third-country CCP or some of its clearing services are of such systemic importance that compliance with the specific requirements set out in Regulation (EU) No 648/2012 would not sufficiently address the financial stability risk for the Union or for one or more of its Member States, and in the event that other measures are deemed insufficient to address financial stability risks, ESMA should recommend to the Commission that that CCP or some of its clearing services not be recognised. ESMA can, under that procedure, recommend to the Commission not to recognise a CCP, with or without prior classification of the CCP or some of its services as Tier 2.

On the basis of that recommendation, the Commission should be empowered to adopt, as a measure of last resort, an implementing act specifying that the third-country CCP in question should not be able to provide some or all of its clearing services to clearing members and trading venues established in the Union unless that CCP is authorised in any Member State to do so in accordance with Regulation (EU) No 648/2012. That implementing act should also set up an appropriate adaptation period not exceeding two years, which might be extended once by an additional six months, and should indicate the conditions under which that CCP can continue to provide certain clearing services or activities during the adaptation period and any measures that should be taken during that period in order to limit the potential costs to clearing members and their clients, in particular those established in the Union.

It is important for central banks of issue to be individually consulted by ESMA and express their agreement with any potential recommendation to deny recognition to a third-country CCP given the impact that such a decision could have on the currency that they issue and on the report by ESMA on the application of a Commission implementing act taken following such a recommendation. However, in the case of such a recommendation or report, the agreement or concerns that a central bank of issue may raise should only relate to the currency that it issues and not to the recommendation as a whole or to the report as a whole.

ESMA should regularly review the recognition of third-country CCPs as well as their classification as Tier 1 or Tier 2 CCPs. In that regard, ESMA should consider amongst others, the changes in the nature, size and complexity of the third-country CCP's business. Such reviews should take place at least every five years and whenever a recognised third-country CCP has extended or reduced the range of its activities and services in the Union. Where, following that review, ESMA determines that a Tier 1 CCP should be classified as a Tier 2 CCP, ESMA should set an appropriate adaptation period not exceeding 18 months within which the CCP should comply with the requirements applicable to Tier 2 CCPs.

At the request of a Tier 2 CCP, ESMA should also be able to take into account the extent to which the compliance of such a CCP with the requirements applicable in that third country can be compared to the compliance of that CCP with the requirements of Regulation (EU) No 648/2012. When conducting that assessment, ESMA should take into account the implementing act adopted by the Commission determining that the legal and supervisory arrangements of the third country where the CCP is established are equivalent to those of Regulation (EU) No 648/2012 and any conditions to which the application of that implementing act might be subject. In order to ensure proportionality, ESMA should also consider, when conducting that assessment, the extent to which the financial instruments cleared by the CCP are denominated in Union currencies. The Commission should adopt a delegated act specifying the modalities and conditions to assess such comparable compliance.

ESMA should have all the powers necessary to supervise recognised third-country CCPs to ensure their ongoing compliance with the requirements of Regulation (EU) No 648/2012.

In order to facilitate information sharing and cooperation between ESMA, the Member States' competent authorities responsible for CCP supervision, and the competent authorities responsible for supervision of entities on which the operations of the third-country CCPs might have an impact, ESMA should establish a third-country CCP college. The college members should be able to request any specific matter in relation to third-country CCPs to be discussed by the CCP Supervisory Committee.

In order to enable ESMA to conduct its tasks with regard to third-country CCPs effectively, third-country CCPs should pay supervisory fees for ESMA's supervisory and administrative tasks. Fees should cover costs associated with the applications for recognition of third-country CCPs and their supervision. The Commission should adopt a delegated act specifying further the types of fees, the matters for which fees are due, the amount of the fees and the manner in which they are to be paid.

ESMA should be able to conduct investigations and on-site inspections of Tier 2 CCPs and related third parties to whom those CCPs have outsourced operational functions, services or activities. Where relevant, the competent authorities responsible for the supervision of the clearing members established in the Union should be informed of the findings of such investigations and on-site inspections. Where relevant for the carrying out of their monetary policy tasks, the central banks of issue of all Union currencies of the financial instruments cleared or to be cleared by the CCP should be able to request participation in such on-site inspections.

ESMA should be able to impose periodic penalty payments to compel third-country CCPs to end an infringement, to supply complete and correct information required by ESMA or to submit to an investigation or an on-site inspection.

ESMA should be able to impose fines on both Tier 1 and Tier 2 CCPs where it finds that they have committed, intentionally or negligently, an infringement of Regulation (EU) No 648/2012 by providing incorrect or misleading information to ESMA. In addition, ESMA should be able to impose fines on Tier 2 CCPs where it finds that they have committed, intentionally or negligently, an infringement of the additional requirements applicable to them in that Regulation. Where ESMA has assessed that a Tier 2 CCP in its compliance with the applicable third-country legal framework is deemed to comply with the requirements set out in Article 16 and Titles IV and V of Regulation (EU) No 648/2012, the conduct of that CCP should not be considered an infringement of that Regulation to the extent that it complies with those comparable requirements.

Fines should be imposed according to the level of seriousness of the infringement. Infringements should be divided into different groups for which specific fines should be allocated. In order to calculate the fine relating to a particular infringement, ESMA should apply a two-step methodology consisting of setting a basic amount and adjusting that basic amount, if necessary, by certain coefficients. The basic amount should be established by taking into account the annual turnover of the third-country CCPs concerned and the adjustments should be made by increasing or decreasing the basic amount through the application of the relevant coefficients in accordance with this Regulation.

This Regulation establishes coefficients linked to aggravating and mitigating circumstances in order to give the necessary tools to ESMA to impose a fine which is proportionate to the seriousness of the infringement committed by a third-country CCP, taking into account the circumstances under which that infringement has been committed.

The decision to impose fines or periodic penalty payments should be based on an independent investigation.

Before deciding whether to impose fines or periodic penalty payments, ESMA should give the persons subject to the proceedings the opportunity to be heard in order to respect their rights of defence.

ESMA should refrain from imposing fines or periodic penalty payments where a prior acquittal or conviction arising from identical facts, or from facts which are substantially the same, has acquired the force of res judicata as a result of criminal proceedings under national law.

ESMA's decisions imposing fines and periodic penalty payments should be enforceable and their enforcement should be subject to the rules of civil procedure which are in force in the State in the territory of which it is carried out. Rules of civil procedure should not include criminal procedural rules but could include administrative procedural rules.

In the case of an infringement committed by a Tier 2 CCP, ESMA should be empowered to apply a range of supervisory measures, including requiring a Tier 2 CCP to bring the infringement to an end and, as a last resort, withdrawing the recognition where a Tier 2 CCP has seriously or repeatedly infringed Regulation (EU) No 648/2012. The supervisory measures should be applied by ESMA taking into account the nature and seriousness of the infringement and should respect the principle of proportionality. Before taking a decision on supervisory measures, ESMA should give the persons subject to the proceedings the opportunity to be heard in order to respect their rights of defence. Where ESMA decides to withdraw recognition, ESMA should limit potential market disruption by defining an appropriate adaptation period not exceeding two years.

In relation to the validation by competent authorities and ESMA of significant changes to models and parameters adopted to calculate a CCP's margin requirements, default fund contributions, collateral requirements, and other risk-control mechanisms, procedural aspects and the interplay of that validation with the college decision should be clarified. The preliminary adoption of a significant change to the models or parameters should be possible where needed, especially where their swift change is necessary to ensure the soundness of the CCP's risk management.

Effective supervision of CCPs relies on the building of competences, expertise and capabilities, as well as on the building of cooperative relationships and exchanges between institutions. Since those are all processes that develop over time and follow their own dynamics, the design of a functional, effective and efficient supervisory system for CCPs should take into account its potential evolution in the long term. Therefore, the division of competences established in this Regulation is likely to evolve as the role and capacities of ESMA, supported by the CCP Supervisory Committee, develop. With a view to developing an efficient and resilient supervisory approach regarding CCPs, the Commission should review the effectiveness of ESMA's tasks, in particular those of the CCP Supervisory Committee, in fostering a convergent and coherent application in the Union of Regulation (EU) No 648/2012 and of the division of responsibilities between Union's and Member States' institutions and bodies. The Commission should also report on the impact of this Regulation on the level playing field among CCPs and assess the framework for the recognition and supervision of third-country CCPs. The Commission should submit the report to the European Parliament and to the Council together with any appropriate proposals.

In order to ensure the effective application of the rules laid down in this Regulation in relation to third-country CCPs, the power to adopt acts in accordance with Article 290 of the Treaty on the Functioning of the European Union (TFEU) should be delegated to the Commission in respect of the further specification of the type of fees, the matters for which fees are due, the amount of the fees to be paid and the manner in which they are to be paid; the further specification of the criteria determining whether a third-country CCP is systemically important or is likely to become systemically important for the financial stability of the Union or of one or more of its Member States; the further specification of the criteria to be used in its equivalence assessments of third countries; the specification of how and under what conditions certain requirements shall be complied with by third-country CCPs; the further specification of rules of procedure relating to the imposition of fines or periodic penalty payments, including provisions on the rights of defence, time limits, the collection of fines or periodic penalty payments and the limitation periods for the imposition and enforcement of penalty payments or fines; and measures to amend Annex IV in order to take account of developments in the financial markets. It is of particular importance that the Commission carry out appropriate consultations during its preparatory work, including at expert level, and that those consultations be conducted in accordance with the principles laid down in the Interinstitutional Agreement of 13 April 2016 on Better Law-Making (8). In particular, to ensure equal participation in the preparation of delegated acts, the European Parliament and the Council receive all documents at the same time as Member States' experts, and their experts systematically have access to meetings of Commission expert groups dealing with the preparation of delegated acts.

In order to ensure uniform conditions for the implementation of this Regulation, and in particular with regard to the recognition of third-country CCPs and the equivalence of legal frameworks of third countries, implementing powers should be conferred on the Commission. Those powers should be exercised in accordance with Regulation (EU) No 182/2011 of the European Parliament and of the Council (9).

To ensure consistent harmonisation of rules and supervisory practice on extension of activities and services, colleges and review of models, stress testing and back testing, the Commission should be empowered to adopt regulatory technical standards developed by ESMA with regard to the following: the conditions under which additional services or activities to which a CCP wishes to extend its business are not covered by the initial authorisation; the conditions under which Union currencies are to be considered the most relevant for the purpose of central banks of issue membership in colleges and the details of the practical arrangements for the functioning of colleges; and the conditions under which changes to the models and parameters of CCPs are significant. The Commission should adopt those regulatory technical standards by means of delegated acts pursuant to Article 290 TFEU and in accordance with Articles 10 to 14 of Regulation (EU) No 1095/2010.

Since the objectives of this Regulation, namely, to increase the safety and efficiency of CCPs by laying down uniform requirements for their activities, 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 Regulation does not go beyond what is necessary in order to achieve those objectives.

The use by ESMA of its power to recognise a third-country CCP as a Tier 1 or a Tier 2 CCP should be deferred until the criteria to allow the assessment of: (a) whether or not a third-country CCP is systemically important or likely to become systemically important for the financial system of the Union or of one or more of its Member States; and (b) comparable compliance are further specified.

Regulation (EU) No 648/2012 should therefore be amended accordingly,

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

in Article 15, the following paragraph is added:

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

Article 18 is amended as follows:

Article 19 is amended as follows:

Article 21 is amended as follows:

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.’;

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.’;

the following Chapter is inserted:

‘CHAPTER 3A

CCP Supervisory Committee

Article 24a

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:

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:

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:

• 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:

• 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 24b

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 24c

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 24d

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 24e

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.’;

Article 25 is amended as follows:

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:

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

Article 25b

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 25c

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:

• 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 25d

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:

• 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:

Article 25e

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 25f

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:

• 3. 

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

• 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 25g

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:

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 25h

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 25i

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 25j

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 25k

Periodic penalty payments

• 1. 

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

• 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 25l

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 25m

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 25n

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 25o

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 25p

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:

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 25q

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:

• 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:

• 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.’;

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.’;

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.’;

Article 49 is amended as follows:

Article 82 is amended as follows:

in Article 85 the following paragraphs are added:

in Article 89, the following paragraphs are inserted:

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.’;

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

Infringements relating to capital requirements:

Infringements relating to organisational requirements or conflicts of interest:

Infringements relating to operational requirements:

Infringements relating to transparency and the availability of information:

Infringements relating to obstacles to the supervisory activities:

Adjustment coefficients linked to aggravating factors:

Adjustment coefficients linked to mitigating factors: