Factors or circumstances that caused the CCP to fail or to be likely to fail
A detailed analysis of the factors and circumstances that caused the CCP to fail or to be likely to fail as referred to in Article 37(2), point (a), of Regulation (EU) 2021/23, shall include all of the following:
(a)
a description of the factors and circumstances clearly distinguishing between default events, non-default events and where there is a combination of both;
(b)
an assessment of the conditions and circumstances referred to in Article 22(1), point (a), and Article 22(3) of Regulation (EU) 2021/23 where such conditions or circumstances directly or indirectly contributed to the CCP being deemed to be failing or likely to fail;
(c)
a description of the recovery measures and resolution actions taken or applied by the CCP or the resolution authority before the submission of the business reorganisation plan.
Description of the measures to be adopted to restore the CCP’s long-term viability
1. A description of the measures to be adopted to restore the CCP’s long-term viability as referred to in Article 37(2), point (b), of Regulation (EU) 2021/23 shall include all of the following elements:
(a)
a description on how the measures to be adopted are suited to the strengths and weaknesses of the CCP, in particular in relation to the clearing services provided by the CCP and the economic and financial environment in which the CCP operates;
(b)
a description on how the measures to be adopted take account of the detailed analysis referred to in Article 1, with a description of the extent to which those measures are derived from the factors and circumstances identified in that analysis;
(c)
a description on how the measures to be adopted have included any of the measures previously identified in the recovery plan, where such measures remain valid for the CCP’s strategy to restore its long-term viability;
(d)
a description on how the CCP has used the relevant information and assumptions in relation to its envisaged clearing services, envisaged operational viability and capacity taking into account service providers as well as linked entities and other financial market infrastructures (FMIs); including a description of how the CCP has taken into account the estimated effect of the envisaged measures on market integrity and financial stability, in order to develop each of the measures under the business reorganisation plan and to forecast its performance under each such measure to ensure that the measures to be adopted are suited to the aim of restoring its long-term viability;
(e)
a description on how the measures are linked to the outcome of the analysis of the factors and circumstances that caused the CCP to fail or to be likely to fail, and to the event that caused the resolution plan to be triggered;
(f)
a description on how the measures to be adopted take into account the following:
(i)
any material effects on clearing members, and their direct and indirect clients, and interdependencies with other linked FMIs and trading venues;
(ii)
any material effects on the functioning of the CCP, including netting sets and collateral requirements;
(iii)
the necessity of the continuity of the CCP’s legal and technical arrangements;
(iv)
any envisaged material changes to the recovery plan, to the extent the information is available to the CCP at the business reorganisation planning stage;
(v)
the necessity to maintain, or restore, the CCP’s compliance with the authorisation requirements pursuant to Article 16 and Title IV of Regulation (EU) No 648/2012 and Articles 9, 31, 35, 36, 39 and 70 of Regulation (EU) 2021/23.
For the purposes of the first subparagraph, the level of information in the description of different measures may vary depending on the likelihood that those measures will be adopted under the business reorganisation plan.
2. Any assessments and assumptions made, including the consideration of the viability performance criteria and financial performance criteria set out in Articles 8 and 9, to identify the measures to be adopted under the business reorganisation plan shall be described and compared with the appropriate sector-wide benchmarks for the instruments cleared and shall reflect available macroeconomic forecasts for clearing such instruments.
3. The business reorganisation plan shall include an analysis of the assumptions underpinning the best-case and worst-case scenarios, and the measures deriving from those scenarios. Restoration of the CCP’s long-term viability shall be possible under all scenarios, although the period for implementation, the measures to be adopted and the financial performance may differ.
4. Where several measures to be adopted to restore the CCP’s long-term viability are included in the business reorganisation plan, the description referred to in paragraph 1 shall include the following:
(a)
a justification of the different measures including a description of the different assumptions applied;
(b)
a description of how each of the different measures will restore, jointly or independently, the long-term viability of the CCP;
(c)
a description of the hierarchy in the application of the measures.
5. The business reorganisation plan shall include a general description of any alternative measures disregarded in the process of drawing up the business reorganisation plan.
The reorganisation and restructuring of the activities of the CCP
Where the measures to be adopted to restore the CCP’s long-term viability include a reorganisation and restructuring of the activities of the CCP as referred to in Article 37(3), point (a), of Regulation (EU) 2021/23, the description referred to in Article 2(1) of this Regulation shall also include the following elements:
(a)
a description of the reorganised business and clearing service as they are planned to result from the business reorganisation plan;
(b)
an explanation for the envisaged changes, and their contribution to achieving the objective of reorganising the CCP;
(c)
a description of the impact of the business reorganisation plan on the CCP’s critical functions and core business lines, in particular on the ability of the CCP to continue to provide clearing services;
(d)
a description of the extent to which outsourcing arrangements cover part of the CCP’s critical functions and core business lines, including whether another entity determines prices, provides systems for the clearing, margin calculations or other essential parts of the CCP’s operations, and how such critical functions and core business lines will remain operational;
(e)
a description of how the business reorganisation plan will affect the markets the CCP operates in, and the clearing services provided by the CCP;
(f)
a description of how the adjusted business and clearing service will work where the CCP has entered into arrangements with third parties, including interoperability arrangements and arrangements with service providers, and how the CCP will be able to continue providing its critical functions and services where dependent on such entities;
(g)
a presentation of any changes envisaged to the organisation of the CCP;
(h)
a presentation of the changes to the structure of the CCP’s ownership and any changes to the managers’ incentive structures;
(i)
where relevant, a presentation of the changes to the CCP’s governance, organisation and employees.
Changes to the CCP’s operational systems and infrastructure
Where the measures to be adopted to restore the CCP’s long-term viability include changes to the CCP’s operational systems and infrastructure as referred to in Article 37(3), point (b), of Regulation (EU) 2021/23, the description referred to in Article 2(1) of this Regulation shall include the following elements:
(a)
a presentation of the main operational systems and infrastructure identified that would be impacted by the business reorganisation plan and how they are to be impacted;
(b)
a presentation of any changes envisaged to the organisation of the CCP;
(c)
a presentation of the changes to the structure of the CCP’s ownership and any changes to the managers’ incentive structures;
(d)
where relevant, a presentation of the changes to the CCP’s governance, organisation and employees.
The sale of assets or of business lines
1. Where the measures to be adopted to restore the CCP’s long-term viability include the sale of assets or of business lines referred to in Article 37(3), point (c), of Regulation (EU) 2021/23, the description referred to in Article 2(1) of this Regulation shall include the following elements:
(a)
a description of the measures identifying which of the CCP’s relevant business lines or assets and relating liabilities, rights and obligations, will be wound up or sold, including:
(i)
a description of the relevant conditions for the winding up or sale;
(ii)
the method for the winding up or sale, including the underlying assumptions and any possible expected losses;
(iii)
the expected timescale;
(iv)
any financing or services provided by or to the remaining CCP;
(b)
where part of the business line or asset form part of the CCP’s critical functions or core business lines, a description of how, to the extent the information is available to the CCP, such critical functions or core business lines could be separated from other critical or non-critical functions or core business lines in economic, operational and legal terms;
(c)
where part of the business line or asset form part of the CCP’s critical functions or core business lines, a description of, to the extent the information is available to the CCP, any possible material effects of such separation of assets on clearing members and, to the extent that the information is available, their direct and indirect clients, as well as on trading venues and other FMIs and CCPs;
(d)
where relevant and where possible to identify, a description of any material effects due to the wind up or sale of relevant business lines or assets and positions of the CCP on:
(i)
netting sets, operations or legal arrangements for clearing members and, to the extent that the information is available, their direct and indirect clients;
(ii)
the calculation of collateral requirements, in particular variation margins, and how such wind up or sale could materially affect the collateral requested by clearing members, and, to the extent that the information is available, their direct and indirect clients;
(iii)
the price of allocating and transferring such positions and transactions to another CCP;
(iv)
an explanation of the process for the portability of positions and related assets of the clearing members and clients of the CCP to another CCP, where envisaged, and a description of how likely such portability is to be successful and the measures to be taken to facilitate it;
(v)
a description of the following:
(i)
how the CCP keeps up to date the relevant data on positions in the client omnibus and segregated accounts during the business reorganisation;
(ii)
how the CCP is able to provide the relevant information rapidly during the reorganisation to ensure that all positions and transactions, including client positions, where identifiable, held at the CCP can be identified and potentially transferred successfully;
(e)
where service arrangements or other contractual arrangements are provided by group entities, a description of how such group entities will be affected;
(f)
a description of how the business reorganisation plan takes into account and ensures continuity of the CCP’s legal and technical arrangements and how the plan supports the transfer of the CCP’s functions, including a description of any agreements entered into with other FMIs or relevant service providers in preparation for the application of the business reorganisation plan.
2. For the parts of the CCP that will not be wound up or sold, the business reorganisation plan shall indicate ways to remedy any shortcomings in their operation or performance that could have an impact on their long-term viability, even if those shortcomings are not directly related to the failure of the CCP.
The changes to the CCP’s risk management
Where the measures to be adopted to restore the CCP’s long-term viability include changes to the CCP’s risk management as referred to in Article 37(3), point (d), of Regulation (EU) 2021/23, the description referred to in Article 2(1) of this Regulation shall include a description on:
(a)
how the CCP envisages to comply with its prudential requirements, including by making changes to its default fund methodologies, margin and liquidity risk management frameworks, investment policies, collateral policies and settlement arrangements, and whether any changes are envisaged to the risk management of the CCP;
(b)
how the CCP envisages to comply with its other regulatory requirements, including by making organisational changes, including changes to its organisational structure, business continuity policy and outsourcing arrangements, as well as by making material changes to its management, its conduct of business rules, including the composition of its membership, and its segregation and portability rules;
(c)
how the CCP envisages to comply with its liquidity requirements, including meeting all its payment obligations, in all relevant currencies, as they fall due and the extent to which it is able to have recourse to the liquidity tools set out in its operating rules under the relevant market conditions;
(d)
how the CCP envisages to comply with the requirements to hold pre-funded and committed financial resources available;
(e)
how the CCP envisages to comply with the requirements to have the ability to replenish its pre-funded financial resources.
Timetable for the implementation of the measures to be adopted to restore the CCP’s long-term viability
1. The timetable for implementing the measures referred to in Article 37(2), point (c), of Regulation (EU) 2021/23 shall cover all of the following aspects:
(a)
the overall timeline and the timeframes for implementing the measures set out in the business reorganisation plan;
(b)
a list of the envisaged main actions and steps, with allocated timelines, to be taken by the CCP to implement each measure set out in the business reorganisation plan;
(c)
the estimated target timeline for implementing the reorganisation measures set out in the business reorganisation plan;
(d)
a detailed timeline of planned interactions with the resolution authority and the competent authority;
(e)
a timeline for communicating with the public, taking into account the CCP’s internal and external communication strategy about the implementation of the measures set out in the business reorganisation plan;
(f)
a timeline for communicating with the relevant external stakeholders involved in the implementation of the measures set out in the business reorganisation plan, including clearing members and trade unions;
(g)
where applicable, a timeline for restoring the CCP’s compliance with its authorisation requirements under Regulation (EU) No 648/2012 and with the relevant requirements under Regulation (EU) 2021/23.
2. The CCP shall ensure that the timelines referred to in paragraph 1 are suitable, and enable an effective implementation of the measures set out in the business reorganisation plan.
Source: EUR-Lex (Publications Office of the EU), © European Union, reuse permitted under Commission Decision 2011/833/EU.
