Guidelines on common procedures and methodologies on supervisory review and evaluation process of CCPs under Article 21 of EMIR

10/03/2022| ESMA70-151-3374
Guidelines
On common procedures and methodologies on supervisory review and evaluation process of CCPs under Article 21 of EMIR

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Table of Contents

1. Scope .................................................................................................................................. 3
2. Legislative references, abbreviations and definitions ........................................................ 4
3. Purpose............................................................................................................................... 5
4. Compliance and reporting obligations ................................................................................ 6
5. Guidelines on common procedures and methodologies on supervisory review and
   evaluation process of CCPs under Article 21 of EMIR.............................................................. 7
   5.1 Scope of review and evaluation .................................................................................. 7
   5.2 Format and Depth of review and evaluation ............................................................... 7
   5.3 Frequency of review and evaluation ........................................................................... 8
   5.4 Information - Sources and Methodology ..................................................................... 8
   5.5 Results of the supervisory review - Methodology ....................................................... 9
   Annex I: List of CCP requirements with their respective EMIR provisions and the corresponding
   RTS provisions .........................................................................................................................10
   Annex II: Methodology per Article and requirement ................................................................11

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1. Scope
   Who?
   1.These guidelines apply to competent authorities designated under Article 22 of EMIR that supervise CCPs authorised under Article 14 of EMIR. What?
2. These guidelines relate to common procedures and methodologies for the supervisory
   review and evaluation process pursuant to Article 21 of EMIR. These guidelines do not introduce new requirements for CCPs in addition to the ones specified in EMIR or the relevant technical standards. When?
3. These guidelines apply from 11 May 2022.

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2. Legislative references, abbreviations and definitions
Legislative references
EMIR
ESMA Regulation
Regulation (EU) 648/2012 of 4 July 2012 of the European Parliament and Council on OTC derivatives, central counterparties and trade repositories1 Regulation (EU) No 1095/2010 of the European Parliament and of the Council of 24 November 2010 establishing a European Supervisory Authority (European Securities and Markets Authority), amending Decision No 716/2009/EC and repealing Commission Decision 2009/77/EC2 RTS 153/2013 Commission Delegated Regulation (EU) No 153/2013 of 19 December 2012 on requirements for central counterparties3 Abbreviations EC European Commission EEA ESFS European Economic Area European System of Financial Supervision ESMA European Securities and Markets Authority EU European Union Definitions 4.Unless otherwise specified, the terms used in this consultation paper have the same meaning as in EMIR and the RTS 153/2013. 5.In addition, the following terms apply:
college a college established pursuant to Article 18 of EMIR

1 OJ L 201, 27.7.2012, p.1
2 OJ L 331, 15.12.2010, p. 84
3 OJ L 52, 23.2.2013, p. 41

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3. Purpose
6. These guidelines are based on Article 16(1) of ESMA Regulation and Article 21(6) of
EMIR.
7.The objectives of these guidelines are to establish consistent, efficient and effective supervisory practices within the ESFS and to ensure the common, uniform and consistent application of Article 21 of EMIR. 8.In particular, these guidelines seek to assist competent authorities in the application of the EMIR provisions in the context of performing the review and evaluation of central counterparties by further specifying common procedures and methodologies in order to ensure consistency in the format, frequency and depth of these reviews and evaluations.

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4. Compliance and reporting obligations
Status of the guidelines
9.These guidelines will be issued pursuant to Article 16 of ESMA Regulation and will be addressed to competent authorities. In accordance with Article 16(3) of ESMA Regulation, competent authorities must make every effort to comply with the guidelines.
10. The guidelines specify ESMA’s view of appropriate supervisory practices within the
ESFS or of how EU law should be applied in a particular area. ESMA therefore expects all competent authorities to which the guidelines are addressed to comply with the guidelines. Competent authorities to which the guidelines apply should comply by incorporating them into their supervisory practices as appropriate (e.g. by amending their legal framework or their supervisory processes). Reporting requirements
11. Pursuant to Article 16(3) of ESMA Regulation, competent authorities must inform
ESMA of whether they (i) comply, (ii) do not comply but intend to comply, or (iii) do not comply and do not intend to comply with these guidelines.
12. In case of non-compliance, competent authorities must also notify ESMA within two
months of the date of publication of the guidelines on ESMA’s website in all EU official languages of their reasons for not complying with the guidelines.
13. A template for notifications is available on ESMA’s website. Once the template has
been filled in, it shall be transmitted to ESMA.

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5. Guidelines on common procedures and methodologies
on supervisory review and evaluation process of CCPs under Article 21 of EMIR
5.1 Scope of review and evaluation
14. The scope of the review and evaluation covers all requirements on CCPs laid down in
EMIR and its supplementing regulatory technical standards (RTS 152/2013 and 153/2013 - collectively CCP RTS). The scope of risks to be evaluated shall encompass all risks CCPs are or might be exposed to, including but not limited to financial and operational risks.
15. The detailed list of CCP requirements with their respective EMIR provisions and CCP
RTS corresponding supplementing articles forms the Annex I of the Guidelines. They include capital requirements, organisational requirements, conduct of business requirements, prudential requirements, requirements for the calculation of hypothetical capital and for its associated reporting and interoperability arrangements requirements.
5.2 Format and Depth of review and evaluation
16. Competent authorities should consider all the requirements included in Annex I for the
review and evaluation of any CCP.
17. When conducting the core review of any CCP, competent authorities should consider
all the elements included in the third column ‘Core Review’ of Annex II. The core review should be performed even when competent authorities have not been informed of any change by the CCP during the review period. It is only where the competent authorities positively assess themselves that, during the review period, there has been no change with respect to specific requirements, assumptions and facts underlying their previous analysis that their corresponding core review could then be less granular.
18. Where, for a given requirement, a CCP meets any of the factors that may warrant an
extended or specific review as listed in the fourth column of Annex II, competent authorities should perform for this given requirement, in addition to the core review, the extended review described in the fifth column of Annex II.
19. Where competent authorities perform the review and evaluation of a CCP with respect
to a specific requirement, any corresponding level 3 acts adopted by ESMA (such as guidelines, opinions, Q&As) should be taken into account.

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5.3 Frequency of review and evaluation
20. Competent authorities should carry out a supervisory review and evaluation process of
CCPs annually, on a rolling year (i.e. year on year) basis.
21. Additional ad-hoc review
1. Any material and non-recurrent change to the CCP of an operational, technical,
financial or prudential nature, other than those listed in paragraph 2 of guideline 7, should trigger an additional ad-hoc supervisory review and evaluation process, possibly post implementation of the material change, to specifically reflect the impact of the change of systems, processes, procedures and risk management policies on the CCP.
2. The following material and non-recurrent changes are excluded from this ad-hoc
review:

• the extension of activities and services of the CCP (per Article 15 of EMIR);
• the proposed acquisition of the CCP (per Article 32 of EMIR);
• a change in the outsourcing of major activities linked to the risk management of the
  CCP (per Article 35 of EMIR);
• the review of the CCP’s models and parameters (per Article 49 of EMIR);
• a new interoperability arrangement with a CCP (per Article 54 of EMIR).
  3. This ad-hoc review should focus on the change itself and on all potential impacts this
  change may have on the compliance of the CCP with all requirements listed in Annex I.
  4. Should such an ad-hoc review be performed, the college should be informed by the
  competent authority of the results of this ad-hoc review. This communication to the college should occur as promptly as possible after the ad-hoc review and should not be delayed to be part of the annual review process.
  5.4 Information - Sources and Methodology
  22. The information necessary for supervisory reviews should be sourced through two
  complementary channels:
• the information gathered from the continuous ongoing supervision and oversight by
  the competent authorities and
• the information collected by competent authorities specifically for the purpose of
  conducting the review and evaluation.
  23. The information gathered from the continuous ongoing supervision and oversight of
  CCPs by competent authorities should at least consist of:
• any information about changes introduced by the CCP in any of its internal
  regulations, such as procedures, policies, as well as all publicly available information;

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• all documents, evidences, assessments, validations and reports provided by the
  CCP or written by the competent authority on the occasion of applications by the CCP for extension of activities and services (per Article 15 of EMIR) and validation of significant changes to the models and parameters of the CCP (per Article 49 of EMIR), as well as all topics that may have triggered during the year a specific validation by the competent authority and the opinion of the college (such as Articles 30-32, 35, 51 and 54 of EMIR);
• the results of desk reviews and on-site inspections conducted throughout the year
  by the competent authority.

24. The information collected by the competent authorities specifically for the purpose of
    conducting the review and evaluation of the CCP’s arrangements, strategies, processes and mechanisms in complement of the information collected from their continuous ongoing supervision and oversight, should at least consist of:

• A reviewed self-assessment from the CCP;
• Updated information from the CCP as provided in ESMA’s informal template of risk
  assessment report, which should include an analysis of the performance of the CCP’s risk models over the past year, including its margin models, stress testing framework, liquidity risk controls, collateral haircuts;
• Detailed minutes of ad-hoc meetings and interviews with the CCP’s representative
  organised to prepare the review and relevant college meetings;
• The documents prepared by the CCP for presentation to its risk committee as well
  as the opinions of the risk committee.
  5.5 Results of the supervisory review - Methodology

25. For the purposes of informing the college, the results of the supervisory review should
    be presented as a report. For the benefit of the college members and ESMA, this report should not only firstly present a summarizing list of the noteworthy changes that occurred at the CCP throughout the period under review, but should also provide an updated, comprehensive and consolidated version of the assessment clearly distinguishing between what has changed during the period under review and the assessment of the previous year.

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Annex I: List of CCP requirements with their respective
EMIR provisions and the corresponding RTS provisions Requirements EMIR Provisions RTS 152/2013 & 153/2013 Capital requirements Article 16 Articles 1 to 5 RTS 152/2013 Organisational requirements General Provisions on Organisational Requirements
Article 26 Articles 3 to 11 RTS
153/2013
Senior Management and Board Article 27 Risk Committee Article 28 Record Keeping Article 29 Articles 12 to 16 RTS 153/2013 Information to Competent Authorities Article 31(1) Conflicts of interest Article 33 Business Continuity Article 34 Articles 17 to 23 RTS 153/2013 Outsourcing Article 35 Conduct of Business [Chapter 2 of EMIR] General provisions on Conduct of Business Article 36 Participation requirements Article 37 Transparency Article 38 Segregation and Portability Article 39 Prudential requirements [Chapter 3 of EMIR] Exposure Management Article 40 Margin requirements Article 41 Articles 24 to 28 RTS 153/2013 Default Fund Article 42 Articles 29 to 31 RTS 153/2013 Other financial resources Article 43 Liquidity risk controls Article 44 Articles 32 to 34 RTS 153/2013 Default waterfall Article 45 Articles 35 to 36 RTS 153/2013 Collateral requirements Article 46 Articles 37 to 42 RTS 153/2013 Investment Policy Article 47 Articles 43 to 46 RTS 153/2013 Default procedures Article 48 Review of models, stress testing and back testing
Article 49 Articles 47 to 61 RTS
153/2013
Settlement Article 50
Calculations and Reporting for the purposes of Regulation (EU) No 575/2013 on prudential requirements for credit institutions and investment firms [Chapter 4 of EMIR] Calculation of Kccp Article 50a General Rules for the calculation of Kccp Article 50b Reporting of information Article 50c Calculation of specific items to be reported by the CCP
Article 50d
Interoperability Arrangements [Title V of EMIR] Interoperability Arrangements Article 51 Risk Management Article 52 Provision of margins among CCPs Article 53

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Annex II: Methodology per Article and requirement
Requirements EMIR Core review Factors that may warrant extended/specific review Extended review Capital requirements
Article 16
RTS 152/2013 articles 1 to 5

• An assessment of the CCP’s methods for
  calculating its capital requirements, including any change to the inputs /processes /scenarios applied to calculate the capital requirements for:
  o winding down or restructuring, including how the CCP defines the appropriate time span for winding down its activities; o operational and legal risks; o credit risk, counterparty credit risk, market risk; o business risk, including the impact of the business initiatives during the review period, and the evolution of the CCP’s turnover;
• An assessment of the CCP’s procedures for
  calculating and monitoring the amount of capital it holds;
• An analysis of the CCP’s investment of its
  capital, including details of the time needed to liquidate and access capital;
• Evidence on the CCP’s capital requirements
  and position over the review period, including:
• n/a - n/a

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12 o Amount of capital requirements, by type of risk; o Amount of capital, including retained earnings and reserves eligible to cover capital requirements; o Evidence that the CCP has a permanent and available initial capital of at least 7.5 million EUR over the review period; Organisational requirements [Title IV Chapter 1] General provisions Article 26 RTS 153/2013 articles 3 to 11

• An assessment of the corporate and
  organisational structure, governance arrangements, risk management and internal control mechanisms, including the compliance function, internal auditing and information technology structure.
• The CCP belongs to a
  group and shares some functions, staff or systems with one or several entities of the group;
• Assessment of the interaction with
  other group entities (e.g. staff sharing, secondment, outsourcing), and the corresponding safeguards for independence (e.g. conflict of interest policy, service level agreements, long termination notice, transitional provisions in case of termination etc…) Senior Management and Board
  Article 27 - Evidence on the experience of the CCP’s
  senior management and board members, ensuring they are of sufficiently good repute and experience to ensure the sound and prudent management of the CCP;
• Assessment of the independence of the
  board members;
• Assessment of the composition of the board
  and any update during the review period, including evidence that at least one third and no less than two of the members are
• n/a - n/a

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13 independent, and details on the representation of clients of clearing members; Risk Committee Article 28 - Assessment of the composition and role of the risk committee, including any change over the review period related to:
o the experience and competence of the members, and the independence of its chair; o the ToR and the procedure to consult the risk committee on any arrangements that may impact the risk management of the CCP; o the details on client representation at the risk committee; Record keeping Article 29 RTS 153/2013 articles 12 to 16

• An assessment of the procedures / policies
  implemented to maintain transactions, positions and business records, including any change on how the CCP ensures an appropriate durability, accessibility, granularity of information.
• The CCP maintains
  records outside the Union;
• Where a CCP maintains records
  outside the Union, evidences on how full access to records is ensured to the NCA, ESMA and the ESCB; Information to Competent Authorities
  Article 31(1) - Assessment of the procedures of notification
  of the NCA of any change to its management and any other information necessary to assess compliance with Article 27(1) or the second subparagraph of article 27(2)
• n/a - n/a

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Conflicts of interest
Article 33 - Assessment of the policies for managing
conflicts of interests at a company level, including any change to the:
o Policies / procedures / tools to assess and mitigate all potential and actual risks of conflicts of interest for managers, employees or any person with direct or indirect control or close links; o Procedures on disclosing the general nature of sources of conflicts of interests with clearing members or clients of a clearing member; o Procedures to prevent any misuse of the information held in the CCP’s system;

• Assessment that the remuneration policy is
  still consistent with the CCP’s business and risk strategies, corporate culture and values, the long-term interests of the CCP and the measures taken to avoid conflicts of interest;
• Evidence of a sound corporate culture,
  management of conflicts of interest and whistleblowing processes
• Assessment of the procedures for assessing
  the efficiency of such arrangements and reviewing them frequently
• The CCP is a parent
  undertaking or a subsidiary;
• Assessment of the procedures and
  policies to prevent, monitor and disclose any conflict of interest which may arise as a result of the structure and business activities of other undertakings with which the CCP has a parent undertaking or a subsidiary relationship;
• For the review period, details on
  any new conflict of interest which may have been identified / mitigated as a result of the group’s structure; Business Continuity
  Article 34
  RTS/153/2013 articles 17 to
  23
• An assessment of the CCP’s business
  continuity policy and the main elements of the disaster recovery plan, including:
  o Details of the governance and approval process of the business continuity
• The CCP is a parent
  undertaking or a subsidiary;
• An assessment of the group’s
  business continuity and disaster recovery plan policies, where such policies may impact the CCP;

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15 policies and the frequency and processes linked to the independent review. o Details of the critical business functions and systems that the policies refer to, the criteria used for their identification and the methods employed to assure their continuity ; o Reference to the interrelation and dependencies with other external systems and services outsourced, including how the CCP manages possible business risk that both may involve. An analysis of the overall impact of a disruption of the CCP on the market serviced by it. o Details on the CCP’s procedures for ensuring the timely and orderly settlement or transfer of the assets and positions of clients and clearing members in the event of withdraw of the authorisation.

• An analysis of the business continuity and
  disaster recovery testing arrangements and results, including frequency and arrangements for taking into account and implementing any lessons learned following a test.
• An assessment of the composition /
  procedures of the crisis function

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• An assessment of the communication plan,
  including how all relevant stakeholders are informed during a crisis event; Outsourcing Article 35 - A description of all outsourcing arrangements, including details on the functions outsourced, identify of the providers, service level, performance indicators and termination conditions;
• An analysis of the liability, right and
  obligations of the parties, including evidence on how the CCP remains fully responsible for discharging all of its obligation under EMIR, and how it ensures that all conditions under art. 35 are met at all times;
• The CCP outsources
  major activities linked to risk management;
• A summary of the assessment
  performed by the NCA, which motivated the approval of such outsourcing; Conduct of business [Title IV Chapter 2] General provisions on conduct of business
  Article 36 - Evidence that the CCP has accessible,
  transparent and fair rules for the prompt handling of complaints;
• n/a - n/a
  Participation requirements
  Article 37 - Assessment of the criteria to become a
  clearing member, including an analysis of their fairness, objectivity, their relation and proportionality to risk including the provisions of client clearing services.
• Assessment of the process and procedures
  in place to allow the on-going assessment of, and yearly comprehensive review of compliance with, those criteria and
• n/a - n/a

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17 management of cases where those requirements are not fulfilled anymore. Transparency requirements
Article 38 - Evidences of the CCP’s disclosure (e.g.
website) of relevant information, including:
o public disclosure of prices and fees, discounts and rebates, conditions to benefit from reductions; o disclosure to clearing members and clients of the risks associated with services provided; o disclosures to clearing members and NCA of the price information used to calculate end-of-day exposures; o public disclosure of the volumes of cleared transaction for each asset classes cleared; o public disclosure of the legal, operational and technical requirements for participants;

• Assessment of the processes implemented
  by the CCP to ensure the constant update and accuracy of the webpages, and any evidence of the updates during the review period;
• n/a - n/a

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Segregation and
Portability
Article 39 - An assessment of the CCP’s rules,
procedures and commercial terms to:
o separately identify and record all assets and positions for the account of a given clearing member from the assets of the CCP and from the assets and positions for the account of other clearing members; o ensure that all assets and positions from the clients of a given CM are held segregated from the assets and positions for the house account of the CM (omnibus client segregation); o ensure that the CCP provides the choice of omnibus and individual client segregation basis; o ensure that where a client has chosen individual segregation all assets and positions of the client are held segregated from the assets and positions of the house account and the other clients of the CM;

• A description and analysis of the
  arrangement made to publicly disclose the costs and levels of protection for each form of account offered;
• A description of the possibility for the CCP to
  re-use the collateral posted as margin or default fund contribution by the clearing members and their clients;
• The CCP offers additional
  segregated account solutions in addition to house accounts, omnibus and individual segregation client accounts;
• An assessment of the additional
  forms of segregated accounts available to clearing members, including evidence that such format provides at least an equivalent of segregation and protection of assets and positions as the CCP’s arrangements for omnibus and individual segregation;

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• An assessment of the CCP’s arrangements
  to ensure, in the event of the default of a CM:
  o Attempting to port the positions and assets held by the defaulted CM’ clients; o Should such attempt fail, the liquidation of such positions and the return of the collateral to the clients; Prudential requirements [Title IV Chapter 3 of EMIR] Exposure Management
  Article 40 - Analysis of the methodologies and
  procedures in place to assess the CCP’s liquidity and credit exposures towards clearing members on a near to real-time basis, including a description and an analysis of the price sources used by the CCP;
• Exposures towards
  interoperable CCP(s)
• Analysis of the methodologies and
  procedures in place to assess the
  CCP’s liquidity and credit exposures towards the interoperable CCP(s) Margin requirements
  Article 41
  RTS 153/2013 articles 24 to
  28
• An assessment of the model for calculating
  initial margins, and the methodology applied for the calibration of the core parameters of the model (confidence interval, lookback period, liquidation period), including how it guarantees that the initial margins are not lower than those which would be calculated applying EMIR minimum requirements;
• An assessment of the procedures for
  collecting initial margins, including the periodicity of intraday margin calculation, and eventual thresholds for intraday margin call;
• An assessment of the option chosen to limit
  procyclicality, including data on how the model behaves in periods of stress;
• The CCP clears multiple
  asset classes (with different margin models);
• Core parameters
  (confidence interval / liquidation period) for OTC derivatives are lower than the standard (as authorized per art. 24(4) and 26(4) of RTS 153/2013);
• The CCP applies portfolio
  margining across different instruments, including
• A detailed assessment of the
  margin methodology for each asset class/business line;
• Where a single model covers
  multiple business lines, assessment of how each asset class characteristics are taken into account;
• Where the core parameters for
  OTC derivatives are lower than the standard, evidence that such parameters would be more appropriate given the specific features of the considered OTC derivatives;

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• A summary and analysis of the CCP’s margin
  backtesting results for the period under review. cases where the 80% cap is removed;
• The CCP calculates and
  exchange margins through an interoperability link;
• An assessment of the approach
  applied on portfolio margining between different instruments, including:
• An analysis of the materiality of the
  margin reductions;
• An assessment of the level and
  reliability of the correlation (or any other statistical parameter of dependence) between the financial instruments
• An analysis of the methodologies
  and procedures in place for exchanging margins through the interoperable link Default Fund Article 42 RTS 153/2013 articles 29 to 31
• Assessment of the methodologies for sizing
  each DF, including how min/max values are set;
• Assessment of the methodology for
  allocating DF contributions and procedures for collecting DF contributions, including replenishment;
• Analysis of the methodology applied to
  define extreme but plausible scenarios to size DFs, including any change to the list of stress scenarios over the review period;
• Assessment of the adequacy of the DF to
  withstand, under extreme but plausible market conditions the default of the clearing member to which it has the largest exposures
• The CCP has multiple
  business lines / default funds;
• For each DF/business line, a
  detailed assessment of the methodology for sizing the DF, including the dedicated extreme but plausible scenarios;

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21 or of the second and third largest clearing members (Cover 1 or 2+3); Other financial resources
Article 43 - Assessment of the adequacy of the
prefunded resources to withstand under extreme but plausible market conditions, the default of the two clearing members to which it has the largest exposures (Cover 2); n/a n/a Liquidity risk controls
Article 44
RTS 153/2013 articles 32 to
34

• Assessment of the available liquid resources,
  broken down by type (cash, committed credit lines, committed repos, highly marketable financial instruments), and including the identity of the liquidity providers, the liability, rights and obligations of the parties, the termination conditions, etc.
• Analysis of the CCP’s liquidity exposures,
  including over the review period the dates/scenarios/clearing members leading to the largest exposures;
• Analysis of the risk management framework,
  including how liquidity needs are covered under a wide range of scenarios, as well as any indication in case of breach and a description of the measures taken;
• The CCP clears
  instruments in multiple currencies;
• The CCP clears
  instruments with high liquidity requirements (e.g. repos)
• Description and assessment of the
  arrangements in place to access liquidity in different currencies;
• For each currency, a description
  and assessment of the models/ procedures/ processes in place to monitor liquidity exposures;

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• Assessment of the procedure and
  methodologies to control and monitor concentration risk on liquidity exposures Default waterfall Article 45 RTS 153/2013
  article 35 to 36
• Assessment of the methodology for
  calculating the CCP’s dedicated own resources;
• Description and analysis of the composition
  of the CCP’s own resources and analysis of how they’re invested;
• Assessment of the procedures for monitoring
  the level of own resources, and notifying NCAs in the event of a breach;
• Multiple business lines /
  default waterfalls
• Allocation of the CCP’s
  own resources across waterfalls
• Assessment of how the CCP
  ensures proper allocation of own resources across waterfalls; Collateral requirements
  Article 46
  RTS 153/2013 articles 37 to
  42
• An assessment of the scope of eligible
  collateral accepted by the CCP, including details of instruments or cash in Union currencies and if any limits applies;
• The breakdown of collateral held (broken
  down by currency) in the form of (i) cash in Union currencies and non-Union currency, (ii) sovereign bonds, (iii) EU corporate bonds and (iv) other securities issued in a Union Currency;
• An assessment of the methodology and
  criteria applied to ensure that non-cash collateral can be considered as highly liquid collateral in accordance with Annex I of RTS 153/2013;
• The CCP accepts and
  holds cash in multiple currencies;
• The CCP accepts and
  holds financial instruments in multiple currencies
• For each currency, an assessment
  of how the CCP manages currency risk stemming from the collateral it holds, distinguishing between cash and financial instruments;

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• An assessment of the risk mitigation
  methodologies applied by the CCP regarding collateral, including:
  o Methodologies and procedures applied for valuating collateral on a near to real time basis; o The methodology for calibrating haircuts; o The methodology for setting concentration limits. Investment Policy Article 47 RTS 153/2013 articles 43 to 46
• Analysis of the CCP’s investment policy, and
  in particular the breakdown of invested collateral between cash and financial instruments over the period under review;
• A list of financial instruments in which the
  CCP invested during the period under review, and an assessment of the methodology applied to determine that such instruments are highly liquid in accordance with Annex II of RTS 153/2013;
• An analysis of the financial institutions where
  instruments are deposited, and the methodology used to assess the credit risk and the arrangements which prevent losses due to the default or insolvency of these institutions.
• An assessment of the methodologies applied
  to define concentration limits, monitor concentration of the CCP’s financial resources and mitigate concentration risk.
• The CCP holds
  investments in multiple currencies;
• The CCP has put in place
  arrangements for maintaining financial instruments/ cash with a third party (EU credit institution or third-country financial institution);
• An assessment of how the CCP
  manages currency risk stemming from its o investments in financial instruments; o deposits in cash;
• Where assets are deposited with a
  third party, an analysis of how assets belonging to CMs are identifiable separately from assets belonging to the CCP and to the third party.

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Default procedures Article 48 - An analysis of the adequacy and enforceability of the CCP’s procedures when managing a default, including identifying the default, informing stakeholders, transferring clients’ assets and positions, liquidating portfolios.

• Description and evidence that regular testing
  and verification are performed to ensure enforceability of the procedures (fire drills), and that the results of such review are taken into account; o The review shall cover, where relevant, the results of any test performed during the review period;
• Multiple business lines
  (liquidation of instruments through multiple markets);
• The CCP clears
  instruments with complex risk features (e.g. OTC derivatives CDS, IRS)
• Coordination within a
  group in terms of default management
• Specific service closure
  procedure with respect to an interoperable link
• For each business line, a
  description of the applicable default procedure;
• Where applicable, evidence that
  the CCP has implemented and tested procedures to manage the liquidation of a defaulter’s portfolio on multiple markets simultaneously;
• Where applicable, evidence that
  the CCP can rely on necessary in￾house expertise or external advice to manage and liquidate complex products, including in a period of stress;
• Where applicable, an assessment
  of the procedures in place at group level to manage the default of a common clearing member;
• Where applicable, an assessment
  of the procedures implemented to manage the service closure of the interoperable link; Review of models, stress testing and back testing
  Article 49
  RTS 153/2013 articles 47 to 61
• An assessment of the CCP’s backtesting
  programme, sensitivity tests, stress testing programme and reverse stress tests programme, including any change to the policies applied to set:
  o the appropriate time horizon of the tests; o the frequency of the tests;
• n/a - n/a

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25 o The historical and hypothetical scenarios applied for the stress testing, sensitivity testing and revers stress testing; o the criteria used to assess the results; o the actions to be taken depending on the results and reporting to be provided to the risk committee; o the level of disclosure of the results to clearing members and clients; Settlement Article 50 - A description of all arrangements for the settlement of transactions;

• An assessment of the level of transparency
  of the information provided to clearing members with respect to deliveries of financial instruments, including whether the CCP has an obligation to make or receive delivery of financial instruments;
• Where the CCP has no obligation to make
  delivery or bear liability for the delivery of cleared contracts, an assessment that the risk of non-delivery is clearly articulated in the CCP’s rulebook, including potential compensation of participants;
• Where the CCP has an obligation to make or
  receive physical deliveries of financial instruments:
  o An assessment of the DvP mechanisms used;
• The CCP does not rely on
  central bank money to settle its transactions;
• For settlement arrangements
  where central bank money is not used, an analysis of the alternative solution including details of:
  o the list of commercial banks used; o the flows per currency and bank; o an analysis of how cash settlement risk is monitored, and the mitigation measures implemented.

ESMA PUBLIC USE
26 o For contracts where DvP is not used, an analysis of how the CCP bears and mitigates the principal risk; Calculations and Reporting for the purposes of Regulation (EU) No 575/2013 on prudential requirements for credit institutions and investment firms [Chapter 4 of EMIR] Calculation and reporting for the purposes of Regulation (EU) No 575/2013 Articles 50a to 50d

• An assessment of the procedure and
  methodologies related to how the CCP calculates KCCP in accordance with the requirements;
• Evidence that the CCP reports adequately
  the information to its clearing members which are institutions or to their competent authorities;
• n/a - n/a
  Interoperability Arrangements [Title V of EMIR] Interoperability Arrangements
  Article 51 - Where relevant, an assessment of the
  procedures for non-discriminatory access to the data the CCP needs for the performance of its functions from a trading venue;
• n/a n/a
  Risk Management Article 52 - An assessment of the policies, procedures and systems related to the CCP interoperability arrangement, including:
  o The management of the credit and liquidity risk; o The interdependencies and correlation link to interoperability; o Collateral management, including where permitted re-use of collateral; o Default management and procedures to terminate the interoperability link in the
• n/a n/a

ESMA PUBLIC USE
27 event of the default of one or the other CCP;

• Where the risk-management models used by
  the interoperable CCPs are different, an assessment of the procedures in place to identify those differences, assess the risks and mitigate them; Provision of margins among CCPs
  Article 53 - An assessment of the procedures for
  distinguishing in accounts the assets and positions held for the account of CCPs with whom the CCP has entered an interoperability arrangement;
• n/a n/a

ESMA PUBLIC USE
2