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Regulation (EU) 2021/23 of the European Parliament and of the Council of 16 December 2020 on a framework for the recovery and resolution of central counterparties and amending Regulations (EU) No 1095/2010, (EU) No 648/2012, (EU) No 600/2014, (EU) No 806/2014 and (EU) 2015/2365 and Directives 2002/47/EC, 2004/25/EC, 2007/36/EC, 2014/59/EU and (EU) 2017/1132 (Text with EEA relevance)

Type Regulation

Publication 2020-12-16

Last updated 2026-04-15

State In force

Department Council of the European Union, European Parliament

Source EUR-Lex

articles 100

Reform history JSON API

(47) ‘netting arrangement’ means an arrangement under which a number of claims or obligations can be converted into a single net claim, including a close-out netting arrangement under which, on the occurrence of an enforcement event (however or wherever defined), the obligations of the parties are accelerated so as to become immediately due or are terminated, and in either case are converted into or replaced by a single net claim, including a close-out netting provision as defined in point (n)(i) of Article 2(1) of Directive 2002/47/EC of the European Parliament and of the Council (20) and netting as defined in point (k) of Article 2 of Directive 98/26/EC;

(48) ‘crisis prevention measure’ means the exercise of powers to require a CCP to take measures to remedy deficiencies in its recovery plan under Article 10(8) and (9), the exercise of powers to address or remove impediments to resolvability under Article 16, or the application of an early intervention measure under Article 18;

(49) ‘termination right’ means a right to terminate a contract, a right to accelerate, close out, set-off or net obligations or any similar provision that suspends, modifies or extinguishes an obligation of a party to the contract or a provision that prevents an obligation under the contract from arising that would otherwise arise;

(50) ‘title transfer financial collateral arrangement’ means a title transfer financial collateral arrangement as defined in point (b) of Article 2(1) of Directive 2002/47/EC;

(51) ‘covered bond’ means a covered bond as defined in point (1) of Article 3 of Directive (EU) 2019/2162 of the European Parliament and of the Council (21);

(52) ‘third-country resolution proceedings’ means an action under the law of a third country to manage the failure of a third-country CCP that is comparable, in terms of objectives and anticipated results, to resolution actions under this Regulation;

(53) ‘relevant national authorities’ means the resolution authorities, competent authorities or competent ministries designated in accordance with this Regulation or pursuant to Article 3 of Directive 2014/59/EU or other authorities in Member States with powers in relation to assets, rights, obligations or liabilities of third-country CCPs providing clearing services in their jurisdiction;

(54) ‘relevant third-country authority’ means a third-country authority responsible for carrying out functions comparable to those of resolution authorities or competent authorities pursuant to this Regulation.

TITLE II

AUTHORITIES, RESOLUTION COLLEGE AND PROCEDURES

Section 1

Resolution authorities, resolution colleges and involvement of European Supervisory Authorities

Article 3

Designation of resolution authorities and competent ministries

Each Member State shall designate one or more resolution authorities that are empowered to apply the resolution tools and exercise the resolution powers as set out in this Regulation.

Resolution authorities shall be national central banks, competent ministries, public administrative authorities or other authorities entrusted with public administrative powers.

Resolution authorities shall have the expertise, resources and operational capacity to apply resolution measures and exercise their powers with the speed and flexibility that are necessary to achieve the resolution objectives.

Where a resolution authority designated pursuant to paragraph 1 of this Article is entrusted with other functions, adequate structural arrangements shall be in place to avoid conflicts of interest between the functions entrusted to the resolution authority pursuant to this Regulation and all other functions entrusted to that authority. In particular, arrangements shall be put in place to ensure effective operational independence, including separate staff, reporting lines and decision making process of that resolution authority, from any tasks that the resolution authority may perform pursuant to Article 22 of Regulation (EU) No 648/2012 as a competent authority of the CCP and from the tasks that the resolution authority may perform as the competent authority of the clearing members referred to in point (c) of Article 18(2) of Regulation (EU) No 648/2012.

The requirements expressed in paragraph 3 shall not preclude that reporting lines converge at the highest level of an organisation that subsumes different functions or authorities, or that, staff may, under predefined conditions, be shared between the other functions entrusted to the resolution authority to meet temporarily high workloads, or for the resolution authority to be able to avail itself of the expertise of shared staff.

Authorities exercising supervision and resolution functions under Regulation (EU) No 648/2012 and this Regulation, and persons exercising those functions on their behalf, shall cooperate closely in the preparation, planning and application of resolution decisions, both where the resolution authority and the competent authority are separate entities and where the functions are carried out by the same entity.

Resolution authorities shall adopt and make public the internal rules they have in place to ensure compliance with the requirements set out in paragraph 3, including rules regarding professional secrecy and information exchanges between the different functional areas.

Member States where no CCP has been established may derogate from the requirements set out in paragraph 3, except with regards to arrangements to avoid conflicts of interest.

Each Member State shall designate a single ministry which shall be responsible for exercising the functions entrusted to the competent ministry pursuant to this Regulation.

Where the resolution authority in a Member State is not the competent ministry, the resolution authority shall inform the competent ministry without undue delay of the decisions taken pursuant to this Regulation and, unless otherwise laid down in national law, obtain its approval before implementing decisions that will have a direct fiscal impact or systemic implications that are likely to lead to a direct fiscal impact.

10.

Member States shall notify the Commission and the European Supervisory Authority (European Securities and Markets Authority) (ESMA), established by Regulation (EU) No 1095/2010, of the resolution authorities designated pursuant to paragraph 1.

11.

Where a Member State designates more than one resolution authority pursuant to paragraph 1, the notification referred to in paragraph 10 shall include the following:

(a) the reasons justifying that multiple designation;

(b) the allocation of functions and responsibilities between those authorities;

(d) the resolution authority designated as the contact authority for the purposes of cooperation and coordination with the relevant authorities of other Member States.

12.

ESMA shall publish a list of the resolution authorities and the contact authorities notified pursuant to paragraph 10.

Article 4

Resolution colleges

The resolution authority of the CCP shall establish, manage and chair a resolution college to carry out the tasks referred to in Articles 12, 15 and 16, and ensure cooperation and coordination with the authorities that are members of the resolution college and, where appropriate, cooperation with third-country competent authorities and resolution authorities.

Resolution colleges shall provide a framework for resolution authorities and other relevant authorities to perform the following tasks:

(a) exchange information relevant for drawing up resolution plans, including for taking into consideration the systemic impact of the implementation of the resolution plan, for the application of preparatory and preventative measures and for resolution;

(b) draw up resolution plans pursuant to Article 12;

(d) identify, address and remove impediments to the resolvability of CCPs pursuant to Article 16; and

(e) coordinate public communication about resolution plans and strategies.

The following shall be members of the resolution college:

(a) the resolution authority of the CCP;

(b) the competent authority of the CCP;

(c) the competent authorities and the resolution authorities of the clearing members referred to in point (c) of Article 18(2) of Regulation (EU) No 648/2012, including, where relevant, the European Central Bank (ECB) in the framework of the tasks concerning the prudential supervision of credit institutions within the single supervisory mechanism conferred upon it in accordance with Council Regulation (EU) No 1024/2013 (22) and the Single Resolution Board (SRB) in its role as a resolution authority of credit institutions within the single resolution mechanism conferred upon it in accordance with Regulation (EU) No 806/2014;

(d) the competent authorities and the resolution authorities of clearing members, other than those referred to in point (c). Those competent authorities and resolution authorities shall inform the resolution authority of the CCP and justify their participation in the college based on their assessment of the impact that the CCP’s resolution could have on the financial stability of their respective Member State;

(e) the competent authorities or the resolution authorities of clearing members’ clients, provided that the college does not already have a member from their own Member State in accordance with points (c), (d), (f), (g) or (h). Those authorities shall inform the resolution authority of the CCP and justify their participation in the college based on their assessment of the impact that the CCP’s resolution could have on the financial stability of their respective Member State;

(f) the competent authorities referred to in point (d) of Article 18(2) of Regulation (EU) No 648/2012;

(g) the competent authorities and the resolution authorities of the CCPs referred to in point (e) of Article 18(2) of Regulation (EU) No 648/2012;

(h) the competent authorities referred to in point (f) of Article 18(2) of Regulation (EU) No 648/2012;

(i) the members of the European System of Central Banks (ESCB) referred to in point (g) of Article 18(2) of Regulation (EU) No 648/2012;

(j) the central banks of issue referred to in point (h) of Article 18(2) of Regulation (EU) No 648/2012;

(k) the central banks of issue of the Union currencies of the financial instruments cleared by the CCP, other than those referred to in point (j). Those central banks of issue shall inform the resolution authority of the CCP and justify their participation in the college based on their assessment of the impact that the CCP’s resolution could have on their respective currency of issue;

(l) the competent authority of the parent undertaking, where applicable;

(m) the competent ministry, where the resolution authority referred to in point (a) is not the competent ministry;

(n) ESMA; and

(o) the European Supervisory Authority (European Banking Authority) (EBA), established by Regulation (EU) No 1093/2010.

ESMA, EBA and the authorities referred to in points (d), (e), (k) and (l) of paragraph 2 shall not have voting rights in resolution colleges.

Where the ECB is a member of the college pursuant to points (c) and (j) of paragraph 2, it shall have two votes in the college.

The competent authorities and resolution authorities of clearing members established in third countries and the competent authorities and resolution authorities of third-country CCPs with which the CCP has established interoperability arrangements may be invited to participate in the resolution college as observers. Their attendance shall be conditional on those authorities being subject to confidentiality requirements equivalent, in the opinion of the resolution authority of the CCP as the chair of the resolution college, to those laid down in Article 73.

The participation of third-country authorities in the resolution college may be limited to the discussion of select cross-border enforcement issues, which may include the following:

(a) effective and coordinated enforcement of resolution actions, in particular in accordance with Articles 53 and 77;

(b) identification and removal of possible impediments to effective resolution action that may stem from divergent laws governing collateral, netting and set-off arrangements and different recovery and resolution powers or strategies;

(c) identification and coordination of any need for new licensing, recognition or authorisation requirements, considering the need for resolution actions to be carried out in a timely fashion;

(d) possible suspension of any clearing obligation for the relevant asset classes affected by the resolution of the CCP pursuant to Article 6a of Regulation (EU) No 648/2012 or to any equivalent provision under the national law of the third country concerned;

(e) possible influence of different time-zones on the applicable close of business hours regarding the end of trading.

The resolution authority of the CCP as the chair of the resolution college shall be responsible for the following tasks:

(a) establishing written arrangements and procedures for the functioning of the resolution college, after consulting the other members of the resolution college;

(b) coordinating all activities of the resolution college;

(d) keeping all members of the resolution college fully informed in advance of the organisation of meetings, of the main issues to be discussed in those meetings and of the items to be considered for the purposes of those discussions;

(e) deciding whether and which third-country authorities are invited to attend particular meetings of the resolution college in accordance with paragraph 4;

(f) enabling, promoting and coordinating the timely exchange of all relevant information between members of the resolution college; and

(g) keeping all members of the resolution college informed, in a timely manner, of the decisions and outcomes of those meetings.

In order to facilitate the performance of the tasks assigned to the college, members of the college referred to in paragraph 2 shall be entitled to contribute to the setting of the agenda of the college meetings, in particular by adding points to the agenda of the meeting.

In order to ensure the consistent and coherent functioning of resolution colleges across the Union, ESMA shall develop draft regulatory technical standards in order to specify the content of the written arrangements and procedures for the functioning of the resolution colleges referred to in paragraph 1.

For the purposes of preparing those regulatory standards, ESMA shall take into account the relevant provisions of the delegated acts adopted on the basis of Article 88(7) of Directive 2014/59/EU.

ESMA shall submit those draft regulatory technical standards to the Commission by 12 February 2022.

The Commission is empowered to supplement this Regulation by adopting the regulatory technical standards referred to in the first subparagraph of this paragraph in accordance with Articles 10 to 14 of Regulation (EU) No 1095/2010.

Article 5

ESMA Resolution Committee

ESMA shall create a resolution committee (the ‘ESMA Resolution Committee’) pursuant to Article 41 of Regulation (EU) No 1095/2010 for the purpose of preparing the decisions entrusted to ESMA in this Regulation, except for the decisions to be adopted pursuant to Article 11 of this Regulation.

The ESMA Resolution Committee shall also promote the drawing up and coordination of resolution plans and develop methods for the resolution of failing CCPs.

The ESMA Resolution Committee shall be composed of the authorities designated pursuant to Article 3(1).

Authorities referred to in points (i) and (v) of Article 4(2) of Regulation (EU) No 1093/2010 shall be invited to participate in the ESMA Resolution Committee as observers.

For the purposes of this Regulation, ESMA shall cooperate with the European Supervisory Authority (European Insurance and Occupational Pensions Authority) (EIOPA) established by Regulation (EU) No 1094/2010 of the European Parliament and of the Council (23) and EBA within the framework of the Joint Committee of the European Supervisory Authorities established under Article 54 of Regulation (EU) No 1093/2010, Article 54 of Regulation (EU) No 1094/2010 and Article 54 of Regulation (EU) No 1095/2010.

For the purposes of this Regulation, ESMA shall ensure structural separation between the ESMA Resolution Committee and other functions referred to in Regulation (EU) No 1095/2010.

Article 6

Cooperation between authorities

Competent authorities, resolution authorities and ESMA shall cooperate closely for the purposes of this Regulation. In particular, during the recovery phase, the competent authority and the members of the supervisory college should cooperate and communicate effectively with the resolution authority, to enable the resolution authority to act in a timely manner.

The resolution authority of a CCP and the resolution authorities of its clearing members shall cooperate closely with the aim of ensuring that there are no impediments to resolution.

Competent authorities and resolution authorities shall cooperate with ESMA for the purposes of this Regulation in accordance with Regulation (EU) No 1095/2010.

Competent authorities and resolution authorities shall, without delay, provide ESMA with all the information necessary to carry out its duties in accordance with Article 35 of Regulation (EU) No 1095/2010.

Section 2

Decision-making and procedures

Article 7

General principles regarding decision-making

Competent authorities, resolution authorities and ESMA shall take account of all the following principles and aspects when making decisions and taking action pursuant to this Regulation:

(b) the imperatives of efficacy, of timeliness, of due urgency of decision-making, when required, and of keeping costs as low as possible are observed when decisions are made and action is taken, while at the same time ensuring that market disruption is mitigated to the greatest extent possible;

(c) the use of extraordinary public financial support is avoided to the greatest extent possible, such support is available and used only as a last resort and in accordance with the conditions laid out in Article 45, and no expectation of public financial support is created;

(d) resolution authorities, competent authorities and other authorities cooperate with each other to ensure that decisions are made and action is taken in a coordinated and efficient manner;

(e) the roles and responsibilities of relevant authorities within each Member State are defined clearly;

(f) the interests of the Member States where the CCP provides services and where its clearing members, and to the extent the information is available, their clients and indirect clients, including where those clients or indirect clients are designated by Member States as O-SIIs, and any linked FMIs, including interoperable CCPs, are established, and in particular the impact of any decision or action or inaction on the financial stability or fiscal resources of those Member States and the Union as a whole;

(g) resolution authorities and resolution colleges cannot require Member States to provide extraordinary public financial support, nor impinge on the budgetary sovereignty and fiscal responsibilities of Member States;

(h) the interests of affected clearing members, and to the extent the information is available, their clients and indirect clients, creditors and other stakeholders of the CCP in the Member States involved need to be balanced by avoiding unfairly prejudicing or unfairly protecting the interests of particular actors and avoiding unfair burden allocation within and across Member States;

(i) any obligation under this Regulation to consult an authority before any decision or action is taken implies at least an obligation to consult on those elements of the proposed decision or action which have or which are likely to have an effect on the clearing members, clients, linked FMIs or trading venues or an impact on the financial stability of the Member State where the clearing members, clients, linked FMIs or trading venues are established or located;

(j) where an authority raises an issue concerning the financial stability of its Member State, the resolution authority and the resolution college of the CCP consider it thoroughly and if they do not take the concerns expressed into account, explain in writing the reasons for not doing so;

(k) resolution plans referred to in Article 12 are complied with unless, taking into account the circumstances of the case, deviation from those plans is necessary in order to better achieve the resolution objectives;

(l) transparency is ensured towards the relevant authorities wherever possible, and in any case where a proposed decision or action is likely to have implications on the financial stability or fiscal resources of any relevant Member State;

(m) they coordinate and cooperate as closely as possible, also with the goal to lower the overall cost of resolution; and

(n) the following are kept to a minimum, to the extent possible: negative economic and social effects, including negative impacts on financial stability, of any decision on all the Member States where the CCP provides services and where its clearing members, and to the extent the information is available, their clients and indirect clients, including where those clients or indirect clients are designated by Member States as O-SIIs, and any linked FMIs, including interoperable CCPs, are established.

Article 8

Information exchange

Resolution authorities, competent authorities and ESMA shall, on their own initiative or on request, provide each other in a timely manner with all the information relevant for the exercise of their tasks under this Regulation.

By way of derogation from paragraph 1, the resolution authorities shall only divulge confidential information provided by a third-country authority where that authority has given its prior written consent.

Resolution authorities shall provide the competent ministry with all information relating to decisions or measures that require notification, consultation or consent of that ministry.

TITLE III

PREPARATION

CHAPTER I

Recovery and resolution planning

Section 1

Recovery planning

Article 9

Recovery plans

CCPs shall draw up and maintain a recovery plan providing for measures to be taken in the case of both default and non-default events and combinations of both, in order to restore their financial soundness, without any extraordinary public financial support, and allow them to continue to provide critical functions following a significant deterioration of their financial situation or a risk of breaching their capital and prudential requirements under Regulation (EU) No 648/2012.

The measures included in the recovery plan shall:

(a) comprehensively and effectively address all the risks identified in the different scenarios, including possible uncovered liquidity shortfalls;

(b) in the case of losses due to a default event, ensure the re-establishment of a matched book and the full allocation of uncovered losses to clearing members, and to their clients if those clients are direct creditors of the CCP, and to shareholders, taking into account the interests of all stakeholders;

(c) include loss-absorbing arrangements that are adequate to cover the losses that might arise from all types of non-default events; and

(d) enable the replenishment of the CCP’s financial resources, including its own funds, to a level sufficient in order for the CCP to meet its obligations under Regulation (EU) No 648/2012 and to support the continued and timely operation of the critical functions of the CCP.

The recovery plan shall include a framework of indicators based on the risk profile of the CCP, that identify the circumstances under which measures in the recovery plan are to be taken. The indicators may be of either a qualitative or a quantitative nature relating to the financial soundness and operational viability of the CCP and should enable recovery measures to be taken early enough to provide sufficient time for the plan to be implemented.

CCPs shall put in place appropriate arrangements for the regular monitoring of the indicators referred to in paragraph 3. CCPs shall report to their competent authorities on the outcome of that monitoring. Competent authorities shall transmit information to the supervisory college, where they deem such information significant.

ESMA shall, in cooperation with the ESRB, by 12 February 2022, issue guidelines in accordance with Article 16 of Regulation (EU) No 1095/2010 to specify the minimum list of qualitative and quantitative indicators referred to in paragraph 3 of this Article.

CCPs shall include provisions in their operating rules, outlining the procedures to be followed by them where, in order to achieve the goals of the recovery process, they propose to:

(a) take measures provided for in their recovery plan despite the fact that the relevant indicators have not been met; or

(b) refrain from taking measures provided for in their recovery plan despite the fact that the relevant indicators have been met.

Any decision taken pursuant to this paragraph and its justification shall be notified to the competent authority without delay.

Where a CCP intends to activate its recovery plan, it shall notify the competent authority of the nature and magnitude of the problems it has identified, setting out all relevant circumstances and indicating the recovery measures or other measures it intends to take to address the situation as well as the envisaged time-frame to restore its financial soundness by use of those measures.

Where the competent authority considers that a recovery measure that the CCP intends to take may cause significant adverse effects to the financial system or is unlikely to be effective, it may require the CCP to refrain from taking that measure.

Following the notification received under the second subparagraph of paragraph 6 of this Article, the competent authority shall immediately assess whether the circumstances require the use of early intervention powers in accordance with Article 18.

The competent authority shall promptly inform the resolution authority and the supervisory college, and the resolution authority shall promptly inform the resolution college, of any notification received in accordance with the second subparagraph of paragraph 6 and with the first subparagraph of paragraph 7, and of any subsequent instruction by the competent authority in accordance with the second subparagraph of paragraph 7.

Where the competent authority is informed in accordance with the first subparagraph of paragraph 7 of this Article, it shall restrict or prohibit any remuneration of equity and instruments treated as equity, including dividend payments and buybacks by the CCP, to the fullest extent possible without triggering an event of default, and it may restrict or prohibit any payments of variable remuneration as defined by the CCP’s remuneration policy pursuant to Article 26(5) of Regulation (EU) No 648/2012, discretionary pension benefits or severance packages to senior management as defined in point 29 of Article 2 of Regulation (EU) No 648/2012.

CCPs shall, at least annually and in any case after any change to their legal or organisational structure or business or financial situation which could have a material effect on those plans or otherwise necessitate a change to the plans, review, test and, where necessary, update their recovery plans. Competent authorities may require CCPs to update their recovery plans more frequently.

10.

Recovery plans shall be drawn up in accordance with Section A of the Annex and take into account all relevant interdependencies within the group to which the CCP belongs. Competent authorities may require CCPs to include additional information in their recovery plans. Where relevant, the competent authority of the CCP shall consult the competent authority of the CCP’s parent undertaking.

11.

Recovery plans shall:

(a) not assume any access to or receipt of extraordinary public financial support, central bank emergency liquidity assistance or central bank liquidity assistance provided under non-standard collateralisation, tenor and interest rate terms;

(b) consider the interests of all stakeholders that are likely to be affected by the plan, including clearing members and, to the extent that the information is available, their direct and indirect clients; and

(c) ensure that clearing members do not have unlimited exposures toward the CCP and stakeholders’ potential losses and liquidity shortfalls are transparent, measurable, manageable and controllable.

12.

ESMA shall, in cooperation with the ESRB, by 12 February 2022 issue guidelines in accordance with Article 16 of Regulation (EU) No 1095/2010 further specifying the range of scenarios to be considered for the purposes of paragraph 1 of this Article. In issuing such guidelines, ESMA shall take into account, where appropriate, supervisory stress testing exercises.

13.

Where the CCP is part of a group and contractual parental or group support agreements form part of the recovery plan, the recovery plan shall contemplate scenarios in which those agreements cannot be honoured.

14.

Following a default or a non-default event, a CCP shall use an additional amount of its pre-funded dedicated own resources, prior to the use of the arrangements and measures referred to in point 15 of Section A of the Annex to this Regulation. That amount shall not be lower than 10 % nor higher than 25 % of the risk-based capital requirements calculated in accordance with Article 16(2) of Regulation (EU) No 648/2012.

To comply with that requirement, the CCP may use the amount of capital it holds, in addition to its minimum capital requirements, to comply with the notification threshold referred to in the delegated act adopted on the basis of Article 16(3) of Regulation (EU) No 648/2012.

15.

ESMA shall, in close cooperation with EBA and after consulting the ESCB, develop draft regulatory technical standards specifying the methodology for calculation and maintenance of the additional amount of pre-funded dedicated own resources to be used in accordance with paragraph 14. When developing those technical standards, ESMA shall take into account all of the following:

(a) the structure and the internal organisation of CCPs and the nature, scope and complexity of their activities;

(b) the structure of incentives of the shareholders, management and clearing members of CCPs and of the clients of clearing members;

(c) the appropriateness for CCPs, depending on the currencies in which the financial instruments they clear are denominated, the currencies accepted as collateral and the risk stemming from their activities, in particular where they do not clear OTC derivatives as defined in point (7) of Article 2 of Regulation (EU) No 648/2012, to invest that additional amount of dedicated own resources in assets other than those referred to in Article 47(1) of that Regulation; and

(d) the rules applying to and the practices of third-country CCPs, as well as the international developments concerning the recovery and resolution of CCPs, in order to preserve the competitiveness of internationally active Union CCPs, and the competitiveness of Union CCPs compared to third-country CCPs providing clearing services in the Union.

Where ESMA concludes, on the basis of the criteria referred to in point (c) of the first subparagraph, that it is appropriate for certain CCPs to invest that additional amount of pre-funded dedicated own resources in assets other than those referred to in Article 47(1) of Regulation (EU) No 648/2012, it shall also specify:

(a) the procedure through which, in the event that those resources are not immediately available, CCPs may resort to recovery measures that require the financial contribution of non-defaulting clearing members;

(b) the procedure that CCPs shall follow to subsequently reimburse the non-defaulting clearing members referred to in point (a) up to the amount to be used in accordance with paragraph 14 of this Article.

ESMA shall submit the draft regulatory technical standards referred to in the first subparagraph to the Commission by 12 February 2022.

16.

The CCP shall develop adequate mechanisms to involve linked FMIs and stakeholders which would bear losses, incur costs or contribute to cover liquidity shortfalls in the event that the recovery plan was implemented in the process of drawing-up of that plan.

17.

The board of the CCP shall assess, taking into account the advice of the risk committee in accordance with Article 28(3) of Regulation (EU) No 648/2012, and approve the recovery plan before submitting it to the competent authority.

18.

Where the board of the CCP has decided not to follow the advice of the risk committee, it shall promptly inform the competent authority in accordance with Article 28(5) of Regulation (EU) No 648/2012 and explain its decision in detail to the competent authority.

19.

Recovery plans shall be integrated in the corporate governance and the overall risk management framework of the CCP.

20.

The measures set out in the recovery plans that create financial or contractual obligations on clearing members and, where relevant, clients and indirect clients, linked FMIs or trading venues shall form part of the operating rules of CCPs.

21.

CCPs shall ensure that the measures set out in the recovery plans are enforceable at all times in all jurisdictions where the clearing members, linked FMIs or trading venues are located.

22.

The obligation of CCPs to include in their recovery plans the right to make a recovery cash call and, if applicable, to reduce the value of any gains payable by the CCPs to non-defaulting clearing members shall not be applicable to the entities referred to in Articles 1(4) and 1(5) of Regulation (EU) No 648/2012.

23.

Clearing members shall communicate to their clients in a clear and transparent manner if and in what way measures in the CCP’s recovery plan may affect them.

Article 10

Assessment of recovery plans

CCPs shall submit their recovery plans to the competent authority.

The competent authority shall transmit each plan to the supervisory college and to the resolution authority without undue delay. The competent authority shall review the recovery plan and assess the extent to which it satisfies the requirements set out in Article 9 within six months of the submission of the plan and in coordination with the supervisory college in accordance with the procedure in Article 11.

When assessing the recovery plan, the competent authority and the supervisory college shall take into consideration the following factors:

(a) the CCP’s capital structure, its default waterfall, the level of complexity of the organisational structure, the substitutability of its activities and the risk profile of the CCP, including in terms of financial, operational and cyber risks;

(c) whether the recovery tools and their sequence specified by the recovery plan create appropriate incentives for the CCP’s owners, clearing members, and where possible their clients, as relevant, to control the amount of risk that they bring to or incur in the system, monitor the CCP’s risk-taking and risk management activities and contribute to the CCP’s default management process.

When assessing the recovery plan, the competent authority shall take parental support agreements into consideration as valid parts of the recovery plan only where those agreements are contractually binding.

The resolution authority shall examine the recovery plan in order to identify any measures which may adversely impact the resolvability of the CCP. Where any such measures are identified, the resolution authority shall bring them to the attention of the competent authority and make recommendations to the competent authority on ways to address the adverse impact of those measures on the resolvability of the CCP, within two months of the transmission of each recovery plan by the competent authority.

Where the competent authority decides not to act on the recommendations of the resolution authority pursuant to paragraph 5, it shall fully justify that decision to the resolution authority.

Where the competent authority agrees with the recommendations of the resolution authority, or considers in coordination with the supervisory college in accordance with Article 11 that there are material deficiencies in the recovery plan or material impediments to its implementation, it shall notify the CCP and shall give it the opportunity to submit its views.

The competent authority, taking into account the CCP’s views, may require the CCP to submit, within two months, extendable by one month with the competent authority’s approval, a revised plan demonstrating how those deficiencies or impediments are addressed. The revised plan shall be assessed in accordance with paragraphs 2 to 7.

Where the competent authority, after consulting the resolution authority and in coordination with the supervisory college in accordance with the procedure set out in Article 11, considers that the deficiencies and impediments have not been adequately addressed by the revised plan, or where the CCP has not submitted a revised plan, it shall require the CCP to make specific changes to the plan within a reasonable period, as defined by the competent authority.

10.

Where it is not possible to adequately remedy the deficiencies or impediments through specific changes to the plan, the competent authority, after consulting the resolution authority and in coordination with the supervisory college in accordance with the procedure set out in Article 11, shall require the CCP to identify within a reasonable timeframe any changes to be made to its business in order to address the deficiencies in or impediments to the implementation of the recovery plan.

Where the CCP fails to identify such changes within the timeframe set by the competent authority, or where the competent authority, after consulting the resolution authority and in coordination with the supervisory college in accordance with the procedures set out in Article 11, considers that the actions proposed would not adequately address the deficiencies or impediments to the implementation of the recovery plan, the competent authority shall require the CCP to take within a reasonable period, as defined by the competent authority, specified actions with regard to one or more of the following objectives, taking into account the seriousness of the deficiencies and impediments and the effect of the measures on the CCP’s business and ability to remain in compliance with Regulation (EU) No 648/2012:

(a) to reduce the risk profile of the CCP;

(b) to enhance the CCP’s ability to be recapitalised in a timely manner to meet its capital and prudential requirements;

(d) to make changes to the default waterfall, recovery measures and other loss allocation arrangements so as to improve resolvability and the resilience of critical functions;

(e) to make changes to the governance structure of the CCP.

11.

The request referred to in the second subparagraph of paragraph 10 shall be reasoned and notified in writing to the CCP.

12.

ESMA, in cooperation with the ESCB and the ESRB, shall develop draft regulatory technical standards further specifying the factors referred to in points (a), (b) and (c) of paragraph 3.

ESMA shall submit those draft regulatory technical standards to the Commission by 12 February 2022.

Article 11

Coordination procedure for recovery plans

The supervisory college shall examine the recovery plan and, where any member of the college considers that there are material deficiencies in the recovery plan or any material impediment to its implementation, that member shall make recommendations to the competent authority of the CCP with regard to those matters within two months of the transmission of the recovery plan by the competent authority.

The supervisory college shall reach a joint decision on all of the following issues:

(a) the review and assessment of the recovery plan;

(b) the application of the measures referred to in Article 10(7), (8), (9) and (10).

The supervisory college shall reach a joint decision on the issues referred to in paragraph 2 within four months of the date of the transmission of the recovery plan by the competent authority.

ESMA may, at the request of a competent authority within the supervisory college, assist the supervisory college in reaching a joint decision in accordance with point (c) of Article 31(2) of Regulation (EU) No 1095/2010.

Where, after four months from the date of transmission of the recovery plan, the college has failed to reach a joint decision on the issues referred to in paragraph 2, the competent authority of the CCP shall make its own decision.

The competent authority of the CCP shall make the decision referred to in the first subparagraph taking into account the views of the other college members expressed during the four-month period. The competent authority of the CCP shall notify in writing that decision to the CCP and to the other members of the college.

Where, by the end of that four-month period, a joint decision has not been reached and a simple majority of the voting members disagree with the competent authority’s proposal for a joint decision on a matter in relation to the assessment of recovery plans or implementation of the measures pursuant to points (a), (b) and (d) of Article 10(10) of this Regulation, any of the voting members concerned, based on that majority, may refer that matter to ESMA in accordance with Article 19 of Regulation (EU) No 1095/2010. The competent authority of the CCP shall await the decision taken by ESMA in accordance with Article 19(3) of Regulation (EU) No 1095/2010 and decide in accordance with the decision of ESMA.

The four-month period shall be deemed to be the conciliation phase within the meaning of Regulation (EU) No 1095/2010. ESMA shall take its decision within one month of the referral of the matter to it. The matter shall not be referred to ESMA after the end of the four-month period or after a joint decision has been reached. In the absence of an ESMA decision within one month, the decision of the competent authority of the CCP shall apply.

Section 2

Resolution planning

Article 12

Resolution plans

The resolution authority of the CCP shall, after consultation with the competent authority and in coordination with the resolution college, in accordance with the procedure set out in Article 14, draw up a resolution plan for the CCP.

The resolution plan shall provide for the resolution actions that the resolution authority may take where the CCP meets the conditions for resolution referred to in Article 22.

The resolution plan shall take into consideration at least the following:

(c) the manner and the circumstances under which a CCP may apply for the use of central bank facilities provided under standard collateralisation, tenor and interest rate terms and the identification of the assets that would be expected to qualify as collateral.

The resolution plan shall not assume any of the following:

(a) extraordinary public financial support;

(b) central bank emergency liquidity assistance;

The resolution plan shall make prudent assumptions regarding the financial resources available as resolution tools that may be required to achieve the resolution objectives and the resources that are expected to be available in accordance with the CCP’s rules and arrangements at the time of entering into resolution. Those prudent assumptions shall take into account the relevant findings of latest stress tests carried out in accordance with Article 32(2) of Regulation (EU) No 1095/2010, specified in point (b) of Article 24a(7) of Regulation (EU) No 648/2012, as well as scenarios of extreme market conditions beyond those in the CCP’s recovery plan.

The resolution authority of a CCP shall, after consultation with the competent authority and in coordination with the resolution college in accordance with the procedure in Article 14, review resolution plans and where appropriate update them, at least annually and in any case after changes to the legal or organisational structure of the CCP, its business or financial situation or any other change that materially affects the effectiveness of the plan.

The CCP and the competent authority shall promptly inform the resolution authority of any such change.

The resolution plan shall specify the circumstances and different scenarios for applying the resolution tools and exercising the resolution powers. It shall clearly distinguish, in particular through different scenarios, between failure caused by default events, non-default events, and a combination of both, as well as between different types of non-default events. The resolution plan shall include the following, quantified whenever appropriate and possible:

(a) a summary of the key elements of the plan, distinguishing between default events, non-default events and a combination of the two;

(b) a summary of the material changes to the CCP that have occurred since the resolution plan was last updated;

(c) a description of how the CCP’s critical functions could be legally and economically separated, to the extent necessary, from its other functions so as to ensure the continuity of its critical functions in the resolution of the CCP;

(d) an estimation of the timeframe for implementing each material aspect of the plan, including for replenishing the CCP’s financial resources;

(e) a detailed description of the assessment of resolvability carried out in accordance with Article 15;

(f) a description of any measures required pursuant to Article 16 to address or remove impediments to resolvability identified as a result of the assessment carried out in accordance with Article 15;

(g) a description of the processes for determining the value and marketability of the critical functions and assets of the CCP;

(h) a detailed description of the arrangements for ensuring that the information required pursuant to Article 13 is up to date and available to the resolution authorities at all times;

(i) an explanation as to how resolution actions could be financed without the assumption of the elements referred to in paragraph 4;

(j) a detailed description of the different resolution strategies that could be applied according to the different possible scenarios and their related timeframes;

(k) a description of critical interdependencies between the CCP and other market participants and between the CCP and critical service providers, interoperability arrangements and links with other FMIs, as well as ways to address all of those interdependencies;

(l) a description of critical intra-group interdependencies as well as ways to address them;

(n) a description of how the resolution authority will obtain the necessary information to perform the valuation referred to in Article 24;

(o) an analysis of the impact of the plan on the employees of the CCP, including an assessment of any associated costs, and a description of envisaged procedures to consult with staff during the resolution process, taking into account any national rules and systems for dialogue with social partners;

(p) a plan for communicating with the media and the public so as to be as transparent as possible;

(q) a description of essential operations and systems for maintaining the continuous functioning of the CCP’s operational processes;

(r) a description of the arrangements for notifying the resolution college in accordance with Article 72(1);

(s) a description of the measures to facilitate the portability of positions and related assets of the clearing members and clients of the defaulting CCP from the defaulting CCP to another CCP or a bridge CCP while not affecting the contractual relationships between the clearing members and their clients.

The information referred to in point (a) of paragraph 7 shall be disclosed to the CCP concerned. The CCP may express its opinion in writing on the resolution plan to the resolution authority. That opinion shall be included in the plan.

ESMA, after consulting the ESRB and taking into account the relevant provisions of the delegated acts adopted on the basis of Article 10(9) of Directive 2014/59/EU and respecting the principle of proportionality shall develop draft regulatory technical standards further specifying the contents of the resolution plan in accordance with paragraph 7 of this Article.

When developing the draft regulatory technical standards, ESMA shall enable sufficient flexibility for resolution authorities to take into consideration the specificities of their national legal framework in the area of insolvency law, as well as the nature and complexity of the clearing business performed by the CCPs.

ESMA shall submit those draft regulatory technical standards to the Commission by 12 February 2022.

Article 13

CCPs’ duty to cooperate and provide information

CCPs shall cooperate as necessary in the drawing up of resolution plans and provide their resolution authority, either directly or through their competent authority, with all the information necessary to draw up and implement those plans, including the information and analysis specified in Section B of the Annex.

Competent authorities shall provide resolution authorities with any information referred to in the first subparagraph which is already available to them.

Resolution authorities may require CCPs to provide them with detailed records of the contracts referred to in Article 29 of Regulation (EU) No 648/2012 to which they are a party. Resolution authorities may specify a time limit to provide those records and may specify different time limits for different types of contracts.

A CCP shall exchange information in a timely manner with its competent authorities in order to facilitate the assessment of the risk profiles of the CCP and the interconnectedness with other FMIs, other financial institutions and with the financial system in general as referred to in Articles 9 and 10. Competent authorities shall transmit information to the supervisory college, where they deem such information significant.

Article 14

Coordination procedure for resolution plans

The resolution authority shall transmit to the resolution college a draft resolution plan, the information provided in accordance with Article 13 and any additional information relevant to the resolution college.

The resolution college shall reach a joint decision regarding the resolution plan and any changes thereto within a four-month period from the date of the transmission of that plan by the resolution authority referred to in paragraph 1.

The resolution authority shall ensure that ESMA is provided with all the information that is relevant to its role in accordance with this Article.

The resolution authority may, in accordance with Article 4(4), decide to involve third-country authorities when drawing up and reviewing the resolution plan, provided that they meet the confidentiality requirements laid down in Article 73 and are from jurisdictions in which any of the following entities are established:

(a) the CCP’s parent undertaking, where applicable;

(b) the clearing members of the CCP where their contribution to the default fund of the CCP is, on an aggregate basis over a one-year period, higher than those of the third Member State with the largest contributions as referred to in point (c) of Article 18(2) of Regulation (EU) No 648/2012;

(d) other providers of critical services to the CCP;

(e) interoperable CCPs.

ESMA may, at the request of a resolution authority, assist the resolution college in reaching a joint decision in accordance with point (c) of Article 31(2) of Regulation (EU) No 1095/2010.

Where, after four months from the date of transmission of the resolution plan, the resolution college has failed to reach a joint decision, the resolution authority shall make its own decision on the resolution plan. The resolution authority shall make its decision taking into account the views of the other resolution college members expressed during the four-month period. The resolution authority shall notify in writing the decision to the CCP and to the other members of the resolution college.

Where, by the end of the four-month period referred to in paragraph 5 of this Article, a joint decision has not been reached and a simple majority of the voting members disagree with the resolution authority’s proposal for a joint decision on a matter in relation to the resolution plan, any of the voting members concerned, based on that majority, may refer that matter to ESMA in accordance with Article 19 of Regulation (EU) No 1095/2010. The resolution authority of the CCP shall await the decision taken by ESMA in accordance with Article 19(3) of Regulation (EU) No 1095/2010 and decide in accordance with the decision of ESMA.

Where a joint decision is taken pursuant to paragraph 1 and any resolution authority or competent ministry considers under paragraph 6 that the subject matter of the disagreement impinges on the fiscal responsibilities of its Member State, the resolution authority of the CCP shall initiate a reassessment of the resolution plan.

CHAPTER II

Resolvability

Article 15

Assessment of resolvability

The resolution authority, in coordination with the resolution college in accordance with the procedure set out in Article 17, and after consultation with the competent authority, shall assess the extent to which a CCP is resolvable without assuming any of the following:

(a) extraordinary public financial support;

(b) central bank emergency liquidity assistance;

A CCP shall be deemed resolvable where the resolution authority considers it feasible and credible to either liquidate it under normal insolvency proceedings or to resolve it applying the resolution tools and exercising the resolution powers while ensuring the continuity of the CCP’s critical functions and avoiding any use of extraordinary public financial support and, to the maximum extent possible, any significant adverse effect on the financial system and the potential for undue disadvantage to affected stakeholders.

The adverse effects referred to in the first subparagraph shall include broader financial instability or system wide events in any Member State.

The resolution authority shall notify ESMA in a timely manner where it considers that a CCP is not resolvable.

Upon request by the resolution authority, a CCP shall demonstrate that:

(a) there are no impediments to the reduction of the value of instruments of ownership following the exercise of resolution powers, regardless of whether outstanding contractual arrangements or other measures in the CCP’s recovery plan have been fully exhausted; and

(b) the contracts of the CCP with clearing members or third parties do not enable those clearing members or third parties to successfully challenge the exercise of resolution powers by a resolution authority or otherwise avoid being subject to those powers.

For the purposes of the assessment of resolvability referred to in paragraph 1, the resolution authority shall, as relevant, examine the matters specified in Section C of the Annex.

By 12 August 2022, ESMA, in close cooperation with the ESRB, shall issue guidelines to promote the convergence of resolution practices regarding the application of Section C of the Annex to this Regulation in accordance with Article 16 of Regulation (EU) No 1095/2010.

The resolution authority in coordination with the resolution college shall make the resolvability assessment at the same time as drawing up and updating the resolution plan in accordance with Article 12.

Article 16

Addressing or removing impediments to resolvability

Where, following the assessment in Article 15, the resolution authority, in coordination with the resolution college in accordance with the procedure set out in Article 17, concludes that there are material impediments to the resolvability of a CCP, the resolution authority, in cooperation with the competent authority, shall prepare and submit a report to the CCP and to the resolution college.

The report referred to in the first subparagraph shall analyse the material impediments to the effective application of the resolution tools and the exercise of the resolution powers in relation to the CCP, consider their impact on the business model of the CCP and recommend targeted measures to remove those impediments.

The requirement laid down in Article 14 for resolution colleges to reach a joint decision on resolution plans shall be suspended following the submission of the report referred to in paragraph 1 of this Article until the measures to remove the material impediments to resolvability have been accepted by the resolution authority pursuant to paragraph 3 of this Article or alternative measures have been decided pursuant to paragraph 4 of this Article.

Within four months of the date of receipt of the report submitted in accordance with paragraph 1 of this Article, the CCP shall propose to the resolution authority possible measures to address or remove the material impediments identified in the report. The resolution authority shall communicate to the resolution college any measure proposed by the CCP. The resolution authority and resolution college shall assess, in accordance with point (b) of Article 17(1), whether those measures effectively address or remove those impediments.

Where the resolution authority in coordination with the resolution college in accordance with the procedure set out in Article 17 concludes that the measures proposed by a CCP in accordance with paragraph 3 of this Article would not effectively reduce or remove the impediments identified in the report, the resolution authority shall identify alternative measures which it shall communicate to the resolution college for joint decision in accordance with point (c) of Article 17(1).

The alternative measures referred to in the first subparagraph shall take into account the following:

(a) the threat to financial stability of those material impediments to the resolvability of a CCP;

(c) the effects on the provision of integrated clearing services for different products and portfolio margining across asset classes.

For the purposes of points (a) and (b) of the second subparagraph, the resolution authority shall consult the competent authority and the resolution college and, where appropriate, relevant designated national macroprudential authorities.

The resolution authority shall notify the CCP in writing, either directly or indirectly through the competent authority, of the alternative measures to take in order to achieve the objective of removing impediments to resolvability. The resolution authority shall justify why the measures proposed by the CCP would not be able to remove the material impediments to resolvability and how the alternative measures would be effective in doing so.

The CCP shall propose within one month a plan to comply with the alternative measures, with a reasonable timeframe for the implementation of the plan. If deemed necessary by the resolution authority, the resolution authority may shorten or extend the proposed timeframe.

For the purposes of paragraph 4, the resolution authority may, after consulting the competent authority and while allowing for a reasonable timeframe for implementation:

(a) require the CCP to revise or draw up service agreements, whether intra-group or with third parties, to cover the provision of critical functions;

(b) require the CCP to limit its maximum individual and aggregate uncovered exposures;

(c) require the CCP to make changes to how it collects and holds margins pursuant to Article 41 of Regulation (EU) No 648/2012;

(d) require the CCP to make changes to the composition and number of its default funds referred to in Article 42 of Regulation (EU) No 648/2012;

(e) impose on the CCP specific or regular additional information requirements;

(f) require the CCP to divest specific assets;

(g) require the CCP to limit or cease specific existing or proposed activities;

(h) require the CCP to make changes to its recovery plan, operating rules and other contractual arrangements;

(i) restrict or prevent the development of new or existing business lines or provision of new or existing services;

(j) require changes to legal or operational structures of the CCP or any group entity directly or indirectly under its control to ensure that critical functions may be legally and operationally separated from other functions through the application of resolutions tools;

(k) require the CCP to operationally and financially segregate its different clearing services so as to isolate some specific asset classes from other asset classes and where deemed appropriate, to restrict netting sets covering different asset classes;

(l) require the CCP to set up a parent undertaking in the Union;

(m) require the CCP to issue liabilities that can be written down and converted or to set aside other financial resources to increase the capacity for loss absorption, recapitalisation and the replenishment of pre-funded resources;

(n) require the CCP to take other steps to enable capital, other liabilities and contracts to be able to absorb losses, to recapitalise the CCP or to replenish pre-funded resources. Actions considered may include in particular attempting to renegotiate any liability the CCP has issued or to revise contractual terms, with a view to ensuring that any decision of the resolution authority to write down, convert or restructure that liability, instrument or contract would be effected under the law of the jurisdiction governing that liability or instrument;

(o) where the CCP is a subsidiary, coordinate with relevant authorities with a view to requiring the parent undertaking to set up a separate holding company to control the CCP, where that measure is necessary in order to facilitate the resolution of the CCP and to avoid the adverse effects that the application of the resolution tools and the exercise of the resolution powers could have on other entities of the group;

(p) restrict or prohibit interoperability links of the CCP where such a restriction or prohibition is necessary in order to avoid adverse effects on the achievement of resolution objectives.

Article 17

Coordination procedure to address or remove impediments to resolvability

The resolution college shall reach a joint decision regarding:

(a) the identification of the material impediments to resolvability pursuant to Article 15(1);

(b) the assessment of the measures proposed by the CCP pursuant to Article 16(3), as necessary;

The joint decision on the identification of material impediments to resolvability referred to in point (a) of paragraph 1 of this Article shall be adopted within four months of the submission of the report referred to in Article 16(1) to the resolution college.

The joint decision referred to in point (b) of paragraph 1 of this Article shall be adopted within four months of submission of the CCP’s proposed measures to remove impediments to resolvability as referred to in Article 16(3).

The joint decision referred to in point (c) of paragraph 1 of this Article shall be adopted within four months of the communication of the alternative measures to the resolution college as referred to in Article 16(4).

The joint decisions referred to in paragraph 1 shall be reasoned and notified in writing by the resolution authority to the CCP and, where the resolution authority deems it relevant, its parent undertaking.

ESMA may, at the request of the resolution authority of the CCP, assist the resolution college in reaching a joint decision in accordance with point (c) of Article 31(2) of Regulation (EU) No 1095/2010.

Where, after four months from the date of transmission of the report provided for in Article 16(1), the resolution college has failed to adopt a joint decision, the resolution authority shall take its own decision on the appropriate measures to be taken in accordance with Article 16(5). The resolution authority shall take its decision having taken into account the views of the other resolution college members expressed during the four-month period.

The resolution authority shall notify the decision to the CCP, to its parent undertaking where relevant, and to the other members of the resolution college in writing.

Where, by the end of the four-month period referred to in paragraph 7 of this Article, a joint decision has not been reached and a simple majority of the voting members disagree with the resolution authority’s proposal for a joint decision on a matter referred to in point (j), (l) or (o) of Article 16(7) of this Regulation, any of the voting members concerned, based on that majority, may refer that matter to ESMA in accordance with Article 19 of Regulation (EU) No 1095/2010. The resolution authority of the CCP shall await the decision taken by ESMA in accordance with Article 19(3) of Regulation (EU) No 1095/2010 and decide in accordance with the decision of ESMA.

TITLE IV

EARLY INTERVENTION

Article 18

Early intervention measures

Where a CCP infringes, or is likely to infringe in the near future, the capital and prudential requirements of Regulation (EU) No 648/2012, or poses a risk to financial stability in the Union or in one or more of its Member States, or where the competent authority has determined that there are other indications of an emerging crisis situation that could affect the operations of the CCP, in particular, its ability to provide clearing services, the competent authority may:

(a) require the CCP to update the recovery plan in accordance with Article 9(6) of this Regulation, where the circumstances that required early intervention are different from the assumptions set out in the initial recovery plan;

(b) require the CCP to implement one or more of the arrangements or measures set out in the recovery plan within a specific timeframe. Where the plan is updated pursuant to point (a), those arrangements or measures shall include any updated arrangements or measures;

(c) require the CCP to identify the causes of the infringement or likely infringement as mentioned in paragraph 1 and draw up an action programme, including suitable measures and timeframes;

(d) require the CCP to convene a meeting of its shareholders or, if the CCP fails to comply with that requirement, convene the meeting itself. In both cases the competent authority shall set the agenda, including the decisions to be considered for adoption by the shareholders;

(e) require one or more members of the board or senior management to be removed or replaced where any of those persons is found unfit to perform their duties pursuant to Article 27 of Regulation (EU) No 648/2012;

(f) require changes to the business strategy of the CCP;

(g) require changes to the legal or operational structures of the CCP;

(h) provide the resolution authority with all the information necessary to update the CCP’s resolution plan in order to prepare for the possible resolution of the CCP and the valuation of its assets and liabilities in accordance with Article 24 of this Regulation, including any information acquired through on-site inspections;

(i) require, where necessary and in accordance with paragraph 4, the implementation of the CCP’s recovery measures;

(j) require the CCP to abstain from the implementation of certain recovery measures where the competent authority has determined that the implementation of those measures may have an adverse effect on financial stability in the Union or in one or more of its Member States;

(k) require the CCP to replenish its financial resources in a timely manner in order to comply or maintain compliance with its capital and prudential requirements;

(l) require the CCP to instruct clearing members to invite their clients to participate directly in auctions organised by the CCP when the nature of the auction justifies this exceptional participation. Clearing members shall inform their clients comprehensively about the auction following the instructions received from the CCP. In particular, the CCP shall specify the deadline after which it will not be possible to participate in the auction. Clients shall directly inform the CCP before this deadline of their willingness to participate in the auction. The CCP shall then facilitate the bidding process for those clients. A client shall only be authorised to participate in the auction if it is able to demonstrate to the CCP that it has set up the appropriate contractual relationship with a clearing member to execute and clear the transactions that may result from the auction;

(m) restrict or prohibit any remuneration of equity and instruments treated as equity to the fullest extent possible without triggering an event of default, including dividend payments and buybacks by the CCP, and it may restrict, prohibit or freeze any payments of variable remuneration as defined by the CCP’s remuneration policy pursuant to Article 26(5) of Regulation (EU) No 648/2012, discretionary pension benefits or severance packages to senior management as defined in point 29 of Article 2 of Regulation (EU) No 648/2012.

For each of the measures referred to in paragraph 1, the competent authority shall set an appropriate deadline and evaluate the effectiveness of those measures once they have been taken.

The competent authority shall only apply the measures in points (a) to (m) of paragraph 1 after taking account of the impact of those measures in other Member States where the CCP operates or provides services and after informing the relevant competent authorities, in particular where the CCP’s operations are critical or important for local financial markets, including the places in which clearing members, linked trading venues and FMIs are established.

The competent authority shall apply the measure in point (i) of paragraph 1 only where that measure is in the public interest and is necessary to achieve any of the following objectives:

(a) to maintain the financial stability in the Union or in one or more of its Member States;

(b) to maintain the continuity of the critical functions of the CCP and access to critical functions on a transparent and non-discriminatory basis;

The competent authority shall not apply the measure in point (i) of paragraph 1 in relation to measures involving the transfer of property, rights or liabilities of another CCP.

Where a CCP uses contributions to the default fund of the non-defaulting clearing members in accordance with Article 45(3) of Regulation (EU) No 648/2012, it shall inform the competent authority and the resolution authority without undue delay and explain whether that event reflects weaknesses or problems of that CCP.

Where the conditions referred to in paragraph 1 are met, the competent authority shall notify ESMA and the resolution authority and consult the supervisory college on the envisaged measures provided for in paragraph 1.

Following those notifications and the consultation of the supervisory college, the competent authority shall decide whether to apply any of the measures provided for in paragraph 1. The competent authority shall notify the decision on the measures to be taken to the supervisory college, the resolution authority and ESMA.

The resolution authority, following the notification of the first subparagraph of paragraph 6 of this Article, may require the CCP to contact potential purchasers in order to prepare for its resolution, subject to the conditions laid down in Article 41 and the confidentiality provisions laid down in Article 73.

ESMA shall, by 12 February 2022, issue guidelines in accordance with Article 16 of Regulation (EU) No 1095/2010 to promote the consistent application of the triggers for the use of the measures referred to in paragraph 1 of this Article.

Article 19

Removal of senior management and board

Where there is a significant deterioration in the financial situation of a CCP, or the CCP infringes its legal requirements, including its operating rules, and other measures taken in accordance with Article 18 are not sufficient to reverse that situation, competent authorities may require total or partial removal of the senior management or board of the CCP.

Where the competent authority requires complete or partial removal of the senior management or board of the CCP, it shall notify ESMA, the resolution authority and the supervisory college.

The appointment of the new senior management or board shall be done in accordance with Article 27 of Regulation (EU) No 648/2012 and be subject to the approval or consent of the competent authority. Where the competent authority considers that replacement of the senior management or board as referred to in this Article is insufficient, it may appoint one or more temporary administrators to the CCP to replace or to temporarily work with the board and senior management of the CCP. Any temporary administrator shall have the qualifications, ability and knowledge required to carry out his or her functions and be free of any conflict of interests.

Article 20

Provision of recompense to non-defaulting clearing members

Without prejudice to the responsibility of clearing members to take losses which go beyond the default waterfall, where a CCP in recovery caused by a non-default event has applied the arrangements and measures to reduce the value of any gains payable by the CCP to non-defaulting clearing members set out in its recovery plan, and as a result has not entered into resolution, the competent authority of the CCP may require the CCP to recompense the clearing members for their loss through cash payments or, where appropriate, may require the CCP to issue instruments recognising a claim on the future profits of the CCP. The possibility to provide recompense to non-defaulting clearing members shall not apply to their contractually committed losses in the default management or recovery phases.

The cash payments or the value of instruments recognising a claim on future profits of the CCP issued to each affected non-defaulting clearing member shall be proportionate to its loss in excess of its contractual commitments. The instruments recognising a claim on future profits of the CCP shall entitle the possessor to receive payments from the CCP on an annual basis until the loss has been recouped, if possible in full, subject to an appropriate maximum number of years from the date of issuance. If the non-defaulting clearing members have passed on the excess losses to their clients, the non-defaulting clearing members shall be obliged to pass the payments received by the CCP on to their clients, to the extent that the losses being recompensed are related to client positions. An appropriate maximum share of the CCP’s annual profits shall be used towards payments relating to those instruments.

ESMA shall develop draft regulatory technical standards to specify the order in which recompense must be paid, the appropriate maximum number of years and the appropriate maximum share of the CCP’s annual profits referred to in the second subparagraph of paragraph 1.

ESMA shall submit those draft regulatory technical standards to the Commission by 12 February 2022.

TITLE V

RESOLUTION

CHAPTER I

Objectives, conditions and general principles

Article 21

Resolution objectives

When applying the resolution tools and exercising the resolution powers, the resolution authority shall have regard to all the following resolution objectives, which are of equal significance and shall balance them as appropriate to the nature and circumstances of each case:

(b) to ensure the continuity of the links with other FMIs which, if disrupted, would have a material negative impact on financial stability in the Union or in one or more of its Member States as well as the timely completion of payment, clearing, settlement and record-keeping functions;

(c) to avoid a significant adverse effect on the financial system in the Union or in one or more of its Member States, in particular by preventing or mitigating contagion of financial distress to the CCP’s clearing members, their clients or to the wider financial system, including other FMIs, and by maintaining market discipline and public confidence; and

(d) to protect public funds by minimising reliance on extraordinary public financial support and the potential risk of losses for taxpayers.

When pursuing the objectives set out in paragraph 1, the resolution authority shall seek to minimise the cost of resolution on all affected stakeholders and avoid destruction of the CCP’s value, unless such destruction is necessary to achieve the resolution objectives.

Article 22

Conditions for resolution

The resolution authority shall take a resolution action in relation to a CCP provided that all of the following conditions are met:

(b) there is no reasonable prospect that any alternative private sector measures, including the CCP’s recovery plan or other contractual arrangements, or supervisory action, including early intervention measures taken, would prevent the failure of the CCP within a reasonable timeframe, having regard to all relevant circumstances;

(c) a resolution action is necessary in the public interest to achieve, while being proportionate to, one or more of the resolution objectives, and winding up the CCP under normal insolvency procedures would not meet those resolution objectives to the same extent.

For the purposes of point (a)(ii) of paragraph 1, the competent authority shall provide the resolution authority on its own initiative and without delay with any information that may give an indication that the CCP is failing or likely to fail. The competent authority shall also provide the resolution authority upon request with any other information needed in order to perform its assessment.

For the purposes of point (a) of paragraph 1, a CCP shall be deemed to be failing or likely to fail where one or more of the following circumstances apply:

(a) the CCP infringes, or is likely to infringe, its authorisation requirements in a way that would justify the withdrawal of its authorisation pursuant to Article 20 of Regulation (EU) No 648/2012;

(b) the CCP is unable, or is likely to be unable, to provide a critical function;

(c) the CCP is unable, or is likely to be unable, to restore its viability through the implementation of its recovery measures;

(d) the CCP is unable, or is likely to be unable, to pay its debts or other liabilities as they fall due;

(e) the CCP requires extraordinary public financial support.

For the purposes of point (e) of paragraph 3, public financial support shall not be considered extraordinary public financial support where it meets all of the following conditions:

(a) it takes the form of a State guarantee to back liquidity facilities provided by a central bank according to the central bank’s conditions, or the form of a State guarantee of newly issued liabilities;

(b) the State guarantees referred to in point (a) of this paragraph are required to remedy a serious disturbance in the economy of a Member State and preserve financial stability; and

(c) the State guarantees referred to in point (a) of this paragraph are confined to solvent CCPs, conditional on final approval under the Union State aid framework, are of a precautionary and temporary nature, proportionate to remedy the consequences of the serious disturbance referred to in point (b) of this paragraph and are not used to offset losses that the CCP has incurred or is likely to incur in the future.

The resolution authority may also take a resolution action where it considers that the CCP has applied or intends to apply recovery measures which could prevent the CCP’s failure but cause significant adverse effects to the financial system of the Union or of one of more of its Member States.

ESMA shall issue guidelines to promote the convergence of supervisory and resolution practices regarding the application of the circumstances under which a CCP is deemed to be failing or likely to fail by 12 February 2022, taking into consideration, as appropriate, the nature, and complexity of the services provided by CCPs established in the Union.

When developing those guidelines, ESMA shall take into account the guidelines issued in accordance with Article 32(6) of Directive 2014/59/EU.

Article 23

General principles regarding resolution

The resolution authority shall take all appropriate measures to apply the resolution tools referred to in Article 27 and exercise the resolution powers referred to in Article 48 in accordance with the following principles:

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