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EBA Publishes Draft ITS on Hypothetical CCP Capital

On 19 December 2013, the European Banking Authority (EBA) published final draft Implementing Technical Standards (ITS) on the hypothetical capital of a central counterparty under Articles 50a, 50c and 89(5a) of EMIR, as amended by Article 520 of the Capital Requirements Regulation (CRR).  The ITS have been submitted to the EU Commission for approval and adoption as an EU Regulation.

According to Article 50a and 50c of EMIR, a Central Counterparty (CCP) has to calculate its hypothetical capital and communicate it to all the credit institutions and investment firms acting as clearing members (CMs), and to their competent authorities.  Each CM can then use this calculation to determine its own funds requirements pursuant to Articles 300 to 311 of the CRR.

The ITS specify that reporting must take place monthly in periods of non-stress.  Templates and instructions to facilitate reporting are provided on the EBA website.  Reporting frequency can be increased to weekly or even daily, if:

  • the CCP’s own contribution to the default waterfall is used, or
  • the CCP has to access the contributions of non-defaulting CMs to the default fund.

It is recognised that a phase-in period will be required in order to enable CCPs to develop the internal processes and infrastructures necessary to facilitate reporting.  Accordingly, these provisions will not enter into force until 1 January 2015.

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