26 September 2012

EBA adopts draft technical standards on Capital Requirements for CCPs

The European Banking Authority (EBA) adopted the draft technical standards on capital requirements for Central Counterparties (CCPs) under the EMIR Regulation. The draft standards will now be sent to the European Commission for their adoption. The EBA also adopted an Opinion on the same topic.

The draft regulatory technical standards (draft RTS) developed by the EBA aim at specifying the requirements expressed in the EMIR Regulation (Regulation on OTC derivative transactions, central counterparties and trade repositories) regarding the capital of a CCP.

The draft RTS provide that a CCP should hold capital, including retained earnings and reserves, that is at all times at least equal to the sum of:

• the CCP’s gross operational expenses during an appropriate time span for winding down or restructuring its activities;
• the capital necessary to cover the overall operational and legal risks;
• the capital necessary to cover credit, counterparty credit and market risks not covered by specific financial resources;
• the capital necessary to cover business risk. Since the level of business risk is highly dependent on the individual situation of each CCP, the capital requirement should be based on a CCP's own estimate subject to the approval of the competent authority.

Furthermore, a floor needs to be introduced in order to ensure a prudent level playing field for the capital requirements of a CCP.

The draft RTS will now be sent to the European Commission (EC) who shall decide whether to endorse it within three months. Following an eventual endorsement by the EC, the European Parliament and the Council of the EU may object to the regulatory technical standards before it enters into force.

The standards will have the legal form of a Regulation and will be directly applicable across the European Union. They will be published in the EU Official Journal and translated in all EU official languages.

The EBA also adopted an opinion in order to raise awareness of the European Commission regarding market developments and supervisory practices which should be taken into consideration for a future review of the EMIR Regulation.

In this respect, it is the EBA’s view that competent authorities should be allowed to apply to a CCP an additional capital charge in order to mitigate risks which may arise from situations not covered by the EMIR. The EBA also suggests that intraday credit risk is properly set either within the EMIR framework or with the proposal of a special regulation by the EU-COM.

Full information

EBA final draft Regulatory Technical Standards

EBA opinion on EMIR/CCPs

© EBA