EBF advisor: Timothy Buenker
Publication date: 17 February 2017
The European Banking Federation welcomes the Guidance on Continuity of Access to Financial Market Infrastructures (“FMIs”) to ensure that banks in resolution are able to maintain critical clearing, payments and settlements functions. For your consideration, we have provided the following key messages and answers to some of the consultation questions below.
- For the avoidance of doubt, we understand that the guidance shall be applicable to such firms for which the FMI renders critical services, i.e. where an FMI is not critical to the firm the guidance shall not apply.
- The paper uses the term “custodian”; it does not define it, but appears to treat a custodian as falling into the category of FMIs. This is incorrect. A “custodian” falls into the category of an “FMI intermediary”. We advise to drop the term “custodian”.
- It is important to be very clear that the services provided by an FMI are different from the services provided by an FMI intermediary. FMI intermediaries provide access to infrastructure; FMIs provide infrastructure services. For example, if you look at the European CSD Regulation, you will see that three core CSD services are defined, and that CSDs provide these services, but that intermediaries do not and cannot provide these services.
- FMI intermediaries need to have discretion and flexibility about whether to continue to provide services. FMI intermediaries cannot be locked into an obligation to provide services no matter what the situation is; there needs to be some flexibility so that based on its own risk assessment the FMI intermediary has the ability to suspend services. The point is that collateral may help to manage risk, but some risks are uncertain and difficult to manage. (In this context, it should be noted that a single FMI intermediary may provide access to multiple FMIs located in many different countries; the risk profile for continuing to provide access may be very different).
- The coordination between authorities is the key to successful continuity of access to FMIs and authorities should take a proactive role in the dialogue between themselves. Firms are under specific obligations for ensuring continuity, and the authorities are in charge of their supervision and enforcement. Contractual arrangements cannot and