central securities depositories (CSDs)

EBA Final Draft RTS on Prudential Requirements for CSDS

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On December 16, the EBA published its final report setting out draft RTS on prudential requirements for central securities depositories (“CSDs”) under the Regulation on improving securities settlement and regulating CSDs (Regulation 909/2014) (“CSDR”). The final draft RTS relate to:

  1. The capital requirements for CSDs (required under Article 47);
  2. The additional risk-based capital surcharge reflecting the risks resulting from ancillary banking services (required under Article 54); and
  3. Details of the frameworks and tools for the monitoring, the measuring and management, the reporting and the public disclosure of credit and liquidity risks (required under Article 59).

ESMA Final Report on Technical Advice on Delegated Acts Required Under the CSDR

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On August 5, 2015, the European Securities and Markets Authority (ESMA) published its final report (ESMA/2015/1219) setting out technical advice to the European Commission on delegated acts required by the Regulation on improving securities settlement and regulating central securities depositories (CSDs) (Regulation 909/2014) (CSDR).

The final report sets out ESMA’s technical advice on the content of the delegated acts required by two CSDR provisions:

  • Penalties for settlement failure.
  • The substantial importance of a CSD.

Penalties for settlement failures. ESMA’s advice covers:

  1. The parameters for calculating the cash penalty that a CSD will normally charge for settlement fails (that is, the basic amount of a cash penalty).
  2. The circumstances that may justify an increase of the basic amount of the cash penalty and the parameters for the calculation of such an increase, where applicable under an automated system.
  3. The circumstances that may justify a reduction of the basic amount of the cash penalty and the parameters for the calculation of such a reduction where applicable under an automated system.
  4. How to adapt the parameters for the calculation of cash penalties in the context of a chain of interdependent transactions and whether there are cases where this would not be possible (for example, the chain would not be visible).

The substantial importance of a CSD. ESMA addresses:

  1. Initial recording of securities in a book-entry system (notary service).
  2. Providing and maintaining securities accounts at the top tier level (central maintenance service).
  3. Operating a securities settlement system (settlement service).
  4. The above three core services in the cases of market consolidation affecting host member states and branching into host member states.

ESMA believes that it may be necessary to establish a mechanism for the collection, processing and aggregation of the data necessary for the calculation of the indicators for determining substantial importance, given the importance of the use of consistent data, and is looking at the most appropriate way to establish such a mechanism.