Central Counterparties are Too Big for the European Securities and Markets Authority (Alone): Constructive Critique of the 2019 CCP Supervision Regulation

Once seen as the solution to the systemic risk of over-the-counter derivatives, central counterparties (CCPs) have become a source of concern for the financial stability of the European Union (EU). Distress of a single CCP might be transferred to clearing members and others CCPs, thereby endangering EU monetary and fiscal stability. However, the European Market Infrastructure Regulation (EMIR) has left fiscal responsibility as well as day-to-day supervision of EU-based CCPs (EU-CCPs) at the national level, albeit cross-border colleges of authorities can overturn key decisions of national supervisors. The Commission concluded that these supervisory arrangements needed to be reformed because they hamper the development of a single coherent EU approach to CCP supervision. Although the Commission had proposed to centralise EU-CCP supervision in the European Securities and Markets Authority (ESMA), the final 2019 CCP Supervision Regulation seeks to improve EMIR’s ineffective collegial framework by establishing an internal CCP Supervisory Committee within ESMA. Nevertheless, the continuing lack of loss mutualisation would keep on hindering the development of a single approach to EU-CCP supervision. Moreover, the new regulation adds another layer of complexity to the EMIR framework and clashes with the European monetary constitution. If an agreement on loss mutualisation was reached, EU-CCP supervision should be centralised in two EU bodies along objective lines: while the European Central Bank should be tasked with EU-CCP prudential supervision, ESMA should be responsible for EU-CCP conduct of business supervision. This framework would improve EU-CCP supervision and fit in with the current EU governance at once.

Monetary Constitutionalism: Some Recent Developments

The volume edited by Leland Yeager more than 50 years ago and published in 1962 under the title In Search of a Monetary Constitution has turned out to be remarkably prescient since the Great Inflation was then about to begin. One might expect that in the wake of the Global Financial Crisis and Great Recession interest in monetary-constitutional matters would be revived and this has indeed been the case. In this paper an attempt is made to assess whether and to what extent scientific progress has been made in defining the nature and characteristics of a monetary constitution for the post-Crisis world. To that end some recent contributions to the literature are reviewed critically. Keywords: Constitutionalism, Constitutional Political Economy, Monetary Con-stitution, Monetary Systems. JEL Classification: B53, E02, E50, H40, P16. Resumen: El volumen editado por Leland Yeager hace más de 50 años y pub-licado en 1962 con el título In Search of a Monetary Constitution, ha resultado ser notablemente premonitorio, ya que por aquella época iba a comenzar la Gran Inflación. Podría esperarse que, a raíz de la crisis financiera global y la Gran recesión, hubiese aumentado el interés por las cuestiones monetari-as-constitucionales y, efectivamente, este ha sido el caso. En este trabajo se intenta evaluar si, y hasta qué punto, se ha logrado un progreso científico en la definición de la naturaleza y las características de una constitución mone-taria para el mundo posterior a la crisis. Para ello se revisan críticamente algu-nas contribuciones recientes de la literatura. Palabras clave: Constitucionalismo, Economía Política Constitucional, Con-stitución Monetaria, Sistemas Monetarios. Clasificación JEL: B53, E02, E50, H40, P16.

Pringle: A Paradigm Shift in the European Union's Monetary Constitution

The reference from the Irish Supreme Court seeking a preliminary ruling in the Pringle case concerns the compatibility of the Treaty establishing the European Stability Mechanism (hereinafter ESM Treaty or ESMT) with European Union (EU) law. The Irish Supreme Court was concerned with the legal significance of Council Decision 2011/199, which amended the Treaty on the Functioning of the European Union (TFEU) by inserting a third paragraph in Art 136 TFEU. The new Art 136(3) provides that the Member States whose currency is the euro, may establish a mechanism such as the European Stability Mechanism (ESM) so long as that mechanism is only activated when indispensable to safeguarding the stability of the euro area as a whole, and only if the financial assistance is made subject to strict conditionality. But, because Decision 2011/199 has not yet been ratified by all Member States, the TFEU has not yet been amended. The ESMT nevertheless entered into force at the end of September 2012, and the ESMT commenced its operations in December 2012.