European Commission publishes proposal for review of CSDR

Article 75 of CSDR required the Commission to review and prepare a report assessing the implementation of the Regulation and the way forward for its review by 19 September 2019. The European Parliament, in its resolution on further development of the Capital Markets Union, also invited the Commission to review the settlement discipline11 regime under CSDR in view of Brexit and the Covid-19 crisis. To this end, a targeted consultation took place between 8 December 2020 and 2 February 2021. On 1 July 2021, the Commission adopted a report. It concluded that in broad terms CSDR is achieving its original objectives to enhance the efficiency of settlement in the EU and the soundness of CSDs. For most areas, significant changes to CSDR were considered premature considering the recent application of requirements. Nevertheless, the report identified areas where further action may be necessary to achieve CSDR’s objectives in a more proportionate, effective and efficient manner.

The implementation of mandatory buy-ins will be dependent on the evolution of settlement efficiency in the EU. First, the gathered evidence suggests that cash penalties will incentivise improvements in settlement efficiency, without endangering stability and liquidity across markets and financial instruments. Second, after cash penalties have applied, it can then be assessed how to best apply the mandatory buy-in in light of the evolution of settlement efficiency. The option to suspend the framework in its entirety was disregarded as settlement fails in the EU remain consistently higher than in other major financial markets.

The full Commission proposal is available at https://ec.europa.eu/finance/docs/law/220316-csdr-review-proposal_en.pdf

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