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Finance

Recovery and resolution of central counterparties (CCPs)

Central counterparties must demonstrate a level of resilience that is proportional to the critical role they play in financial systems.

12 March 2023

What the EU is doing and why

A central clearing counterparty (CCP) is a market infrastructure that acts as the counterparty to both sides of a transaction in a financial instrument, becoming the buyer to every seller and the seller to every buyer. By clearing a wide range of financial instruments, that is reconciling their purchases and sales, CCPs manage significant counterparty risk. In this way they enhance market transparency and reduce risks, particularly in derivatives markets.

The EMIR Regulation (European Market Infrastructure Regulation) has mandated central clearing for certain derivatives to increase stability and transparency in the over‑the‑counter (OTC) derivatives market following the 2008 financial crisis. As CCPs’ systemic importance increased, supervisory rules for both EU and non-EU CCPs were strengthened in 2019.

These high regulatory standards were complemented in 2020 by a strong recovery and resolution framework – the CCP Recovery and Resolution Regulation – addressing the risks the distress of CCPs could pose to financial stability.

Central counterparties explained

Policy making timeline

  1. 12 February 2023
    Entry into application

    All provisions of the CCP Recovery and Resolution Regulation are fully in force.

  2. 10 August 2022
    Report

    Report on the treatment of central counterparty equity in the write-down and conversion tool under Regulation (EU) 2021/23.

  3. 11 February 2021
    Entry into force

    Entry into force of the CCP Recovery and Resolution Regulation.

  4. 22 January 2021
    Publication in the Official Journal

    Publication of the CCP Recovery and Resolution Regulation in the Official Journal.

  5. 16 December 2020
    Political agreement

    Political agreement between the European Parliament and the Council on Commission's proposal for a CCP Recovery and Resolution Regulation.

  6. 18 November 2020
    Communication

    Communication on the first reading of the CCP recovery and resolution Regulation.

  8. 28 November 2016
    Legislative proposal

    Proposal for a CCP Recovery and Resolution Regulation.

Relevant legislation

Regulation on a framework for the recovery and resolution of central counterparties (CCP Recovery and Resolution Regulation) - 2021/23/EU

The aim of the regulation is to ensure that both CCPs and national authorities in the EU have the means to act decisively in a crisis scenario. The Regulation aims to preserve the critical functions of EU CCPs, maintain financial stability and protect taxpayers.

The CCP Recovery and Resolution Regulation also empowers the European Securities and Markets Authority (ESMA) to develop draft regulatory technical standards and guidelines supplementing certain non‑essential elements of the regulation.

Basic information

Delegated and implementing acts

Legislative history