The European Securities and Markets Authority (ESMA) has published its final report on draft Regulatory Technical Standards (RTS), clarifying when a Central Securities Depository (CSD) reaches “substantial importance” in a host EU Member State. The criteria, developed under the CSDR Refit, aim to determine when a CSD’s activities require closer regulatory coordination through a supervisory college.
Under the revised CSDR framework, supervisory colleges must be established for CSDs that play a significant role in a host country’s financial system. These colleges bring together regulators from both the CSD’s home and host Member States to improve coordination and risk monitoring. The newly proposed RTS set out the methodology for assessing this importance, relying on quantitative thresholds to ensure a uniform approach across the EU.
Defining ‘Substantial Importance’
ESMA’s assessment focuses on three core CSD functions. The first is notary and central maintenance services, evaluated by the volume and value of securities issued under the host country’s law and maintained by the CSD. The second looks at central maintenance services from a participant perspective, measuring how many of the CSD’s participants are from the host country and their relative significance. The third is settlement services, where the key indicator is the volume and value of settlements involving securities governed by the host Member State’s legal framework.
A new layer of compliance
For CSDs operating across borders, meeting the criteria for substantial importance could mean additional regulatory scrutiny and reporting obligations. Once a CSD crosses the defined thresholds, authorities in the host country gain a more formal role in its supervision, potentially influencing risk management decisions. At the same time, market participants—issuers, investors, and financial intermediaries—may see greater regulatory involvement as a step toward improving stability and oversight in securities settlement.
