ESMA guidance on effective use of resolution tools in CCP crisis planning

The European Securities and Markets Authority (ESMA) has published a resolution briefing for central counterparties (CCPs) under the CCP Recovery and Resolution Regulation (EU) 2021/23 . The briefing provides practical guidance to national resolution authorities (NRAs) on how to operationalise the write-down and conversion of instruments (WDCI) tool within CCP crisis planning. The WDCI tool enables NRAs to absorb losses and recapitalise CCPs by writing down equity and, where necessary, converting debt instruments or other unsecured liabilities into new instruments of ownership—thereby, ensuring the stability and continuity of the CCP's activities.

The briefing focuses on the operational steps and conditions for NRAs to consider when drawing up CCP resolution plans, in particular to: (i) define and receive the relevant data from the CCP, which will enable it to calibrate the amount of resources available through a WDCI; (ii) take into account the impact on the relevant stakeholders, such as shareholders and creditors, financial markets and linked financial market infrastructures when doing so; and (iii) ensure the appropriate implementation of the WDCI and the reorganisation following implementation.

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