In a wide-ranging interview with Paperjam, Klaus Löber, chair of the CCP supervisory committee at the European Securities and Markets Authority (Esma), discussed the strategic objectives and regulatory innovations introduced in European Market Infrastructure Regulation 3 (Emir 3) as well as what drives the EU’s push for greater autonomy, resilience and global competitiveness in clearing.

Kangkan Halder: Can you introduce Emir 3 and its significance for EU financial markets?

Klaus Löber: Emir 3 is a central piece of the European Union efforts to strengthen the resilience of our clearing ecosystem and reinforce financial stability: it is a revision of the original EU legislative framework in this field, responding to the need for a more robust, competitive and attractive EU clearing ecosystem in a changing geopolitical and market landscape. The regulation introduces targeted measures, such as improved supervisory convergence, streamlined supervisory processes, the active account requirement and a new central database. All these measures are designed to enhance the EU capacity to manage financial risks internally and to reduce excessive reliance on third-country central counterparties (CCPs).

Emir 3 is about ensuring that the European Union has a well-functioning and resilient clearing ecosystem that can support our broader savings and investment union (SIU) and economic ambitions.

How does Emir regulate CCPs, and why is this crucial for financial stability?

After the 2008 global financial crisis, Emir established a comprehensive framework for CCPs, setting out requirements for their operation, governance, risk management and default procedures, in line with the relevant global standards in this field, the CPMI-IOSCO principles for FMIs. CCPs play a pivotal role in reducing counterparty risk, but they are also systemic entities--thus we need to consider that their failure would have significant repercussions for the wider financial system.

That is why Emir is oriented to ensure that CCPs can perform their risk absorption function even under stressed conditions, reinforcing financial stability. With Emir 3, the latest review, this framework is further enhanced by addressing cross-border risks, reinforcing the EU’s supervisory powers and improving transparency. All these steps are vital to safeguarding the integrity of our markets.

One of the key changes in Emir 3 is the accelerated approval process for new products and risk models. How do you ensure that this streamlining does not compromise financial stability?

The accelerated approval is about avoiding unnecessary delays for CCPs to roll out new products or risk models while maintaining rigorous scrutiny, but it is not about eliminating requirements or creating shortcuts. In the end, the objective is to ensure that new products and risk models are assessed with the same level of supervisory rigour but within a shorter timeframe, intending to reflect the need for efficiency in today’s fast-evolving markets.

Esma, together with national competent authorities (NCAs), will continue applying high standards of review even if the process is shorter, leveraging our expertise and supervisory convergence tools. The framework allows for speed, but this comes without shortcuts, in order to preserve financial stability while enabling the EU clearing system to remain competitive and responsive.

Emir 3 takes a pragmatic approach to reducing the EU’s excessive reliance on third-country CCPs of substantial systemic importance to EU financial stability, so-called T2 CCPs

Klaus Löber, chair of the CCP supervisory committee, Esma

What benefits do you foresee in implementing the centralised data platform?

This is one of the novelties introduced by Emir 3 with the goal of improving efficiency and data availability. The new central database will be a significant step forward in improving supervisory efficiency and consistency across EU CCPs and NCAs.

It will reduce duplication, streamline CCP applications and simplify reporting for both authorities and market participants. This will facilitate faster decision-making, shorten approval timelines and provide ESMA with a holistic view of CCP activities, risks and market trends.

Ultimately, it will strengthen risk-based supervision while easing the administrative burden on CCPs.

How does Emir 3 address the EU’s reliance on third-country CCPs and is the collaboration with third countries conducted?

Emir 3 takes a pragmatic approach to reducing the EU’s excessive reliance on third-country CCPs of substantial systemic importance to EU financial stability, so-called T2 CCPs, of which there are currently two, both located in the UK. It introduces a requirement for EU counterparties to maintain an active clearing account at an EU CCP, representative of their offshore clearing activity in key derivatives contracts. This active account requirement aims to rebalance clearing flows towards the EU without disrupting global market access.

At the same time, cooperation with third countries remains essential. We continue to engage closely with international counterparts, such as the Bank of England and other international entities, to ensure effective supervision of Tier 2 CCPs and uphold financial stability.

Our long-term objective in this is to support the development of the SIU, turning the EU into a global clearing hub

Klaus Löber, chair of the CCP supervisory committee, Esma

In your view, what key priorities should Esma focus on to future-proof the EU clearing system in the coming years?

Looking forward, our immediate priority is the effective and timely implementation of Emir 3, including the development of 28 regulatory technical standards and guidelines mandated in Emir 3, despite challenging timelines. At present, we are addressing feedback received from stakeholders to our first series of consultations and we will be delivering several draft regulatory technical standards (RTS) to the European Commission soon.

Beyond that, we will also continue to enhance data-driven and risk-based supervision, especially through new tools such as the joint monitoring mechanism (JMM), which is tasked to monitor risks arising from the interconnectedness of different financial actors.

Finally, promoting convergence in the application of Emir 3 and focusing on operational resilience remain our priorities in the middle term, particularly considering the evolving cyber risks, technological innovation and market structure changes. Our long-term objective in this is to support the development of the SIU, turning the EU into a global clearing hub.

Emir 3 aimed to strengthen supervisory convergence and reduce reliance on third-country CCPs. How do these measures enhance the EU’s financial market’s attractiveness, global competitiveness and resilience?

By strengthening supervisory convergence, Emir 3 enhances the consistency, predictability and efficiency of supervision across the EU, reducing complexity and fragmentation for market participants. In general terms by harmonising our supervisory practices and reducing time to market for new CCPs initiatives, the EU clearing framework becomes more predictable and consistent, helping market participants to have clarity and certainty.

This improves the overall attractiveness of the EU clearing ecosystem. We aim to reduce the excessive reliance on third-country CCPs, increasing our resilience by better managing systemic risks and external dependencies. Together, these measures help create a more robust and competitive environment that hopefully will attract new business, supporting the EU’s ambition to deepen its capital markets and strategic autonomy.

Fragmentation risks undermining trust, increasing costs and reducing market efficiency

Klaus Löber, chair of the CCP supervisory committee, Esma

Given the increasing geopolitical fragmentation, how relevant is maintaining adherence to global standards and regulatory cooperation in while ensuring an attractive clearing ecosystem in the EU?

Maintaining adherence to global standards and regulatory cooperation is more important than ever. Fragmentation risks undermining trust, increasing costs and reducing market efficiency. Global regulatory frameworks, developed through international regulatory bodies, have been crucial in safeguarding global market stability and enabling cross-border market access.

For the EU, upholding these standards while building a strong domestic clearing ecosystem is not mutually exclusive. It is precisely through international cooperation that we can better manage systemic risks, promote resilience and ensure the EU remains an attractive and competitive marketplace integrated into the global financial system.

While Emir 3 equips us with the tools to build a resilient internal system to reduce reliance on third-country CCPs, cooperation with third countries remains essential, and Esma is committed to enhancing these cooperation arrangements, as is shown for example in our latest memorandum of understanding signed with our UK counterparties.