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Extended transitional period for capital requirements for non-EU central counterparties

The European Commission adopted a one-year extension of the current transitional regime for capital requirements which is applicable for EU banks and investment firms exposed to non-EU central counterparties (CCPs). The transitional period will be over on 28 June 2022, and this is the final extension under the Regulation (EU) No 575/2013 of the European Parliament and of the Council (Capital Requirements Regulation, “CRR”). This means that those non-EU CCPs which will not be recognized by European Securities and Markets Authority (ESMA) until the end of the transition period, will not be eligible for lower capital requirements.

Under CRR, the EU and non-EU CCPs which are recognized by ESMA, are the ‘Qualifying CCPs’ (QCCPs). This means that EU banks and investment firms are subject to a lower capital requirement for exposures to QCCPs compared to the simple CCPs. Today, EU banks and investment firms are enabled to consider any non-EU CCP that has applied for recognition by ESMA as a QCCP during the recognition process.

Regulation (EU) No 648/2012 of the European Parliament and of the Council (EMIR) ensures a recognizing mechanism for CCPs based outside of the EU. The recognition is based on equivalence decisions accepted by the European Commission and it means that the legal and supervisory framework for CCPs of a certain country is equivalent to the regime of the EU. Thereafter, a CCP based on that country can apply to obtain EU recognition from ESMA. If the recognition has been granted, the EU and outside of the EU counterparties may use a non-EU-based CCP to meet their clearing obligations.