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Capital Markets Union: Commission’s proposal for simpler rules to make settlement in EU financial markets safer and more efficient

The Central Securities Depositories Regulation was adopted in 2014 following the financial crisis to improve the safety and efficiency of settlement, as well as to provide a set of common requirements for Central Securities Depositories across the EU. The 2020 Capital Markets Union Action Plan and the 2021 Commission Work Programme announced the Commission’s intention to come forward with a legislative proposal to amend the Central Securities Depositories Regulation to improve its efficiency and effectiveness and contribute to the development of more efficient settlement markets in the EU.

On 16 March 2022 the European Commission submitted a proposal, based on the results of the Commission’s targeted consultation on the mandated review of the Central Securities Depositories Regulation, as well as input received from various stakeholders, including the European Securities and Markets Authority. It is also part of the Commission’s efforts to ensure that EU legislation delivers results for citizens and businesses effectively and at minimum cost (REFIT).

Central Securities Depositories operate the infrastructure that enables the settlement of securities (such as shares or bonds) in financial markets. Settlement refers to the delivery of securities to a buyer in exchange for the delivery of cash to a seller. It can take up to two business days to settle a transaction, which can result in both credit and legal risks during that period. Ensuring that these transactions are settled in a safe and efficient manner is therefore essential for the EU’s financial system. Central Securities Depositories play a central role in the EU’s capital markets and financial system. For example, transactions settled by EU Central Securities Depositories in 2019 reached around €1,120 trillion.

The overall aim of the proposal is to make securities settlement in the EU safer and more efficient, thereby improving the attractiveness of the EU’s capital markets and ultimately contributing to the financing of our economy. The proposal contains the following key improvements to the Central Securities Depositories Regulation. It improves the passporting regime, simplifies passporting for Central Securities Depositories, through which they can operate across the EU with one single licence. It notably removes costly and duplicative procedures, facilitating the cross-border provision of services and competition. The proposal’s aim is to improve the cooperation between supervisory authorities by requiring the establishment of colleges for certain Central Securities Depositories to increase consistent and convergent supervision. Apart from this, the proposal also improves banking-type ancillary services. It adjusts the conditions under which Central Securities Depositories can access banking services, enabling them to offer settlement services for a broader range of currencies and offering businesses the opportunity to obtain financing from a larger pool of investors, including cross-border. Finally, it also improves the settlement discipline by amending certain elements of the settlement discipline regime, changing the process under which mandatory buy-ins could become applicable and certain technical aspects of the settlement discipline regime to make it more effective and proportionate.

The proposal will now be submitted to the European Parliament and the Council for consideration and adoption.