EACH - European Association of Central Counterparty Clearing Houses

The European Association of Central Counterparty Clearing Houses was established in 1991. EACH groups the biggest CCP clearing houses in and outside the European Union and aims to develop standards and services of clearing institutions. KDPW_CCP representatives participate in two working groups: the Risk Committee and the Derivatives Working Group.

In view of the on-going legislative work on European level concerning new requirements and standards for CCP clearing houses, EACH focused in 2011 mainly on the analysis and consultation of published legislation. EACH has presented its position on drafts concerning capitalisation of banks exposed to CCPs as well as capital requirements for CCPs proposed by the Basel Committee and the European Commission.

EMIR will most likely enter into force in H2 2012. The Regulation will govern capital requirements of CCPs. EMIR will set new standards for CCP clearing houses. The draft provisions govern among others CCP capital requirements and the resources of default funds. According to the draft EMIR, a CCP should have stable, available and separate capital of at least EUR 5 million or EUR 10 million. EMIR will also impose the obligation to clear all trades in specific derivatives in authorised CCPs.

A Capital Requirements Directive (CRD) is also in the drafting as a consequence of Basel III regulations. According to CRD, capital requirements for key banks will increase. Basel III also imposes limitations on exposures to derivatives, especially OTC instruments. The draft solutions will differentiate strongly between capital charges for trades cleared centrally (e.g., in a CCP) and trades cleared bilaterally. The capital requirements under the regulations will differ depending on the quality of the CCP as determined by the structure of default fund resources available to the CCP. The draft Basel Committee capital requirements for exposures to CCPs which refer to the adequate level of resources of a default fund use the notion of qualifying CCP.

A meeting of EACH ExCo organised by KDPW in anticipation of Poland’s Presidency of the EU Council was held in Warsaw on 15 June 2011. Representatives of the Ministry of Finance participated in the meeting by invitation of KDPW. The goal of the meeting was to develop rules of close co-operation in further consultation of the draft amendments of European regulations.

In 2011, the Risk Committee prepared comments to the CPSS-IOSCO document which will form the basis of EACH position on the Recommendations for Payment Systems, SSSs, CSDs, CCPs and Trade Repositories as well as proposed amendments of the Basel III methodology of calculating capital requirements for bank exposure to CCPs.

KDPW hosted a meeting of the EACH Risk Committee on 19-20 May 2011.