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Commission adopts two equivalence decisions for Chinese and Israeli CCPs

On 22 July 2022, the European Commission adopted two equivalence decisions for central counterparties (CCPs) under the supervision of the People’s Bank of China and the Israel Securities Authority. Both equivalence decisions do not come into force until published in the Official Journal of the EU. The equivalence decisions follow the recent decisions adopted for CCPs in Malaysia, Chile and Indonesia, amongst others.

Once third-country CCPs are recognised, EU bank exposures to those CCPs will be subject to lower capital requirements. The transitional regime of the Capital Requirements Regulation (CRR) – under which EU banks may consider any third-country CCP that has applied for recognition by the European Securities and Markets Authority (ESMA) as a ‘Qualifying CCP’ – expires on 28 June 2022 for those CCPs that have applied before 27 June 2020. After that date, higher capital requirements apply to EU banks for exposures to non-recognised third-country CCPs. However, as the ESMA will not have time to recognise the third-country CCPs by then and, as foreseen under the CRR, EU banks will benefit from a three-month grace period before higher capital requirements apply, unless the relevant banking supervisors exercise their discretion to shorten it.

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