European Union : Report on the functionning of the CRR with the related obligations under EMIR

EBA AND ESMA REPORT ON THE FUNCTIONING OF THE REGULATION (EU) NO 575/2013 (CRR) WITH THE RELATED OBLIGATIONS UNDER REGULATION (EU) NO 648/2012 (EMIR)‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌

ESAS-2017-82 │11 January 2017

Contents

Abbreviations 2

Executive summary 3

1. Introduction 4

2. Analysis of potential duplicative requirements 5

3. Capital requirements for CCPs holding a banking licence 5

   Background 5

   Financial resources in accordance with Articles 41 to 44 of the EMIR - clearing activities 7

   Capital requirements in accordance with Article 16 of the EMIR 7

   CRR - Pillar 2 requirements 8

   Capital requirements for interoperability arrangements 8

   Conclusion and proposal 10

4. Leverage and liquidity for CCPs 11

   LR application to CCPs and CMs 11

   Liquidity - NSFR and LCR 12

   Conclusion 13

5. Large exposures 13

   Background 13

   Conclusion 14

6. Difference in MPoR application 14

   Background 14

   Conclusion 15

7. Clients' exposures to CMs 16

   Background 16

   Focus on CRR conditions in Article 305 17

   Segregation 17

   Porting 18

   Legal opinion 19

   Conclusion and proposal 19

8. Conclusions 20

9. Abbreviations

   CCP	central counterparty
   CCR	counterparty credit risk
   CM MPoR	clearing member margin period of risk
   EAD	exposure at default
   IM	initial margin
   NSFR	net stable funding requirements
   LR	leverage ratio
   LCR	liquidity coverage ratio

   Executive summary

   This report provides the main conclusions from the analysis of the joint functioning of the Capital Requirements Regulation (EU) No 575/2013 (CRR) with the Regulation (EU) No 648/2012 (EMIR).

   As requested in the mandate, the European Banking Authority (EBA), together with the European Securities and Markets Authority (ESMA), has focused in particular on those institutions operating as CCPs, and have assessed any potential duplication of requirements for derivative transactions with the ultimate goal of avoiding regulatory risks, as well as undue increased monitoring costs

   for competent authorities.

   After the review of the issues, the EBA and ESMA would recommend that the Commission clarify the overlap of the capital requirements for CCPs holding a banking licence, as well as clarify the wording of Article 305.

   The legal basis of this report is in Article 515 paragraph 1 of the CRR, which requires that: 'By 2 January 2015, EBA, together with ESMA, shall report on the functioning of this Regulation with the related obligations under Regulation (EU) No 648/2012 and in particular with regard to institutions operating a CCP, in order to avoid duplication of requirements for derivative transactions and thereby avoid increased regulatory risk and increased costs for monitoring by competent authorities.'