New EU rules for safer Central Counterparties (CCPs)

Overview

A central clearing counterparty (CCP) is an organisation that acts as the counterparty to both sides of a transaction in a financial instrument. CCPs clear a range of financial instruments. CCPs are essential to the financial system because they manage significant amounts of counterparty risk and are a link between multiple banks, other financial counterparties and corporations.

The number of transactions processed by CCPs has increased since the 2009 G20 commitment to clear standardised over-the-counter (OTC) derivatives through CCPs.

Proposal on CCP recovery and resolution

To address the challenges posed by the growing importance of CCPs, and the potential risks for financial stability if a CCP were to fail, the Commission has adopted a legislative proposal on CCP recovery and resolution. The aim of the proposal is to ensure that both CCPs and national authorities in the EU have the means to act decisively in a crisis scenario. The new rules will ensure that CCPs' critical functions are preserved while maintaining financial stability and helping to avoid the costs associated with the restructuring and the resolution of failing CCPs from falling on taxpayers.

Documents

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