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The European Association of CCP Clearing Houses (EACH) has today responded to the consultation “The Bank of England’s approach to tiering incoming central counterparties under EMIR Article 25”. EACH Members generally welcome the 2-stage approach included in the consultation paper, and believe that such approach provides a clear and generally objective proposal for CCPs to access the UK market. EACH Members also welcome the commitment to regulatory deference proposed by the Bank, which allows the market to maximise the benefits from access to cross-border clearing while ensuring the risks are appropriately managed.
EACH Members, however, are of the opinion that some of the following proposed points could either be reconsidered or would require further clarification:
- Notion of UK Clearing Member – EACH Members kindly propose to delete the inclusion of initial margin and default fund contributions attributable to non-UK subsidiaries of UK headquartered firms from the scope of the triage exercise. The rationale behind this proposal is that CCPs may not always be in a position to perform this assessment due to lack of information and complexities, especially in case of complex corporate structures and groups.
- Lookback period – EACH Members are of the opinion that a 5-year lookback period would able an overly strict measure to provide a good assessment of the situation. We would rather propose a 2-year lookback period.
- Informed Reliance Assessment – EACH Members are of the opinion that more clarity should be provided on how such Informed Reliance Assessment would work from a practical point of view.
- Criteria to be evaluated within the systemic risk assessment – EACH Members believe that additional weighting of the different criteria may further increase transparency and can lead to a clarification of Bank’s expectations towards incoming CCPs.
For more information, please find attached the EACH paper or visit the EACH website at www.eachccp.eu
