The European Securities and Markets Authority (ESMA) has published its 2024 peer review on the supervision of EU central counterparties (CCPs), concluding that while most national authorities meet supervisory expectations, greater consistency is needed in how key risk management activities are defined and overseen.
The review focused on how National Competent Authorities (NCAs) supervise CCPs under the European Market Infrastructure Regulation (EMIR), specifically in relation to outsourcing and intragroup governance arrangements. ESMA found that most NCAs have processes in place to assess CCPs’ ongoing compliance with the relevant requirements. Where practices were deemed insufficient, ESMA issued targeted recommendations.
In the area of outsourcing, several NCAs were found to lack formalised procedures for assessing whether certain arrangements constituted major activities subject to notification or authorisation. The report highlighted cases where outsourcing agreements were incomplete or did not include key elements such as service level agreements. Some authorities were also found not to classify internal audit functions as major risk-related activities, raising concerns about the consistency of supervisory standards across the EU.
Adequate oversight
On intragroup governance, ESMA reported that NCAs generally ensured that CCPs had adequate oversight of group relationships and decision-making structures. However, the review also identified variation in how authorities interpret the EMIR provisions in this area, particularly regarding group-level committees and reporting lines.
While the overall functioning of supervisory colleges was assessed as positive, ESMA warned that divergent approaches to identifying “major activities” linked to risk management could undermine the goal of supervisory convergence.
Inconsistency
“Differences in supervisory practices may lead to inconsistent outcomes, which could impact the resilience of CCPs and the wider financial system,” ESMA stated in its report.
As a next step, ESMA will follow up on the implementation of its recommendations and consider further tools to promote harmonisation. The authority emphasised that clarifying what constitutes a major activity will be key to strengthening EU-wide oversight of CCPs.
