(1)

Article 25(1) and Article 61(1) of Regulation (EU) 2021/23 require the person carrying out the valuation referred to in Articles 24 and 61 of that Regulation (‘the valuer’) to be independent from any public authority and from the central counterparty (‘CCP’) under valuation. Accordingly, uniform rules should apply to determine the circumstances in which a person shall be considered independent both from the relevant public authorities, including the resolution authority, and from the CCP for the purposes of Article 25(1) of Regulation (EU) 2021/23. Those rules should include requirements ensuring the absence of material common or conflicting interest of that person with the resolution authority or the CCP; requirements concerning the qualifications, experience, ability, knowledge and resources of that person and their ability to carry out the valuation effectively without undue reliance on any relevant public authority or the CCP, and requirements concerning the structural separation between the person and both the relevant public authorities and the CCP.

(2)

To address threats to independence such as self-review, self-interest, advocacy, familiarity, trust or intimidation, it is necessary to ensure that the valuer does not have any material interest in common or in conflict with any relevant public authority, including the resolution authority, or with the CCP, including its senior management, controlling shareholders or group entities. In addition, a valuer should not be considered as independent where the valuer has material interests in common or in conflict with any significant clearing member, client or creditor which would be materially affected by a resolution action or which has significantly contributed to the situation that led to the CCP’s resolution. Similarly, personal relationships could represent a material interest. Accordingly, the resolution authority should assess whether any material common or conflicting interests are present.

(3)

To enable the resolution authority to assess whether any material common or conflicting interests are present, the valuer should notify the resolution authority of any actual or potential interest which the valuer considers could, in the assessment of that authority, amount to a material interest and should provide any information that the resolution authority could reasonably request. Following their appointment, the valuer should maintain policies and procedures in accordance with the applicable codes of ethics and professional standards to identify any actual or potential interest which the valuer considers could amount to a material common or conflicting interest. The resolution authority should be notified immediately of any actual or potential interests identified and should consider whether those amount to a material interest, in which case the valuer’s appointment should be terminated and a new valuer appointed.

(4)

Structural separation arrangements constitute safeguards that mitigate the risks of conflicts of interest. As such, their existence should be taken into account in the assessment of a potential valuer. Thus, in the case of legal persons, the independence of a valuer should be assessed by reference to the company or partnership as a whole but taking account of any structural separation and other arrangements that have possibly been put in place to differentiate between those staff members who could be involved in the valuation and other staff members. If the significance of those threats compared to the safeguards applied is such that the independence of the company or partnership applying to be a valuer is compromised, that company or partnership should not be retained as a valuer.

(5)

In order to avoid threats to independence from self-review, a statutory auditor who has completed an audit of the CCP in the year preceding their assessment for eligibility to act as valuer should not be regarded as independent under any circumstances. As regards other audit or valuation services provided to the CCP concerned in the years immediately preceding the date on which independence is to be assessed, those services should also be assumed to present a material common or conflicting interest.

(6)

Independence of the valuer can be reinforced by conditions ensuring that the expertise and resources of the valuer are sufficient and appropriate. It is therefore necessary to ensure that the valuer possesses the necessary qualifications, experience, ability and knowledge in all relevant subjects, including the valuations of the financial instruments cleared by the CCP, the applicable CCP requirements under Regulation (EU) No 648/2012 of the European Parliament and of the Council (2), existing CCP recovery plans and rulebooks, and applicable resolution tools under Regulation (EU) 2021/23.

(7)

In order for the valuer to be able to carry out the valuation effectively, it should also be ensured that the valuer holds, or has access to, sufficient human and technical resources to carry out the valuation.

(8)

In order to ensure their independence and to avoid undue interference with their duties, the valuer should be capable of carrying out the valuation effectively without undue reliance on any relevant public authority, including the resolution authority, or on the CCP. However, the provision of instructions or guidance necessary to support the conduct of the valuation, for example in relation to the methodology provided pursuant to Union legislation in the field of valuation for purposes relating to resolution, should not be seen as constituting undue reliance where such instructions are, or such guidance is, considered necessary to support the conduct of the valuation. In addition, the provision of assistance, such as the provision by the CCP concerned of systems, financial statements, regulatory reports, market data, other records or other assistance to the valuer should not be prevented where, in the assessment of resolution authority, this is considered necessary to support the conduct of the valuation. In accordance with any procedures which have possibly been put in place, the provision of instructions, guidance and other forms of support should be agreed on a case-by-case or pooled basis.

(9)

Independence risks being endangered if a valuation is performed by a person that is employed by or affiliated to any relevant public authority, including the resolution authority, and to the CCP, even in cases where full structural separation has been established within a legal person. It is therefore necessary to ensure that the valuer is not an employee or contractor of any relevant public authority, including the resolution authority, or of the CCP, and does not belong the same group of companies as the CCP.

(10)

In order to ensure the availability of a sufficient number of persons that could be readily available to act as valuer when a resolution process starts, the resolution authority should maintain a provisional list of potential valuers and should revise this list on a regular basis.

(11)

Article 24 of Regulation (EU) 2021/23 distinguishes two valuations over the course of a CCP resolution process: an initial valuation assessing whether the conditions for resolution have been met, and a second valuation which forms the basis for the resolution authority’s decision to apply one or more resolution tools. For the purpose of the initial valuation, it is appropriate to ensure that when determining whether the conditions for resolution are met, a fair, prudent and realistic valuation of the CCP’s assets and liabilities is conducted. For the second valuation, the purpose of which is to inform resolution actions, it is important to ensure that the valuation of the assets and liabilities of the CCP is based on fair, prudent and realistic assumptions.

(12)

In order to accurately reflect the CCP’s circumstances and prevailing market conditions, the valuations set out in Regulation (EU) 2021/23 should be performed as close as possible to the resolution decision date.

(13)

In order to effectively and efficiently perform the valuations set out in Regulation (EU) 2021/23, the valuer should have access to any sources of relevant information and expertise, such as the internal records, systems and models of the CCP. The valuer should also rely on information provided directly by the CCP’s staff, management and auditors, as well as, where relevant, publicly available information on the market structure.

(14)

Where the CCP belongs to a group, considering that contractual intra-group support arrangements may provide additional financial support to the CCP in resolution and influence the resolution strategy, the valuer should consider the effect of those contracts where it is probable that such arrangements will be put into effect. The valuer should consider other formal or informal support arrangements within the group where it is probable that they will remain in place in stressed financial conditions or in resolution. Similarly, the valuer should carefully consider the risk that the CCP’s financial resources could be used to cover for the losses of other group entities, as this could further reduce the value of the CCP’s assets.

(15)

Since interoperability arrangements result in financial interdependencies capable of affecting the valuation, where the CCP has entered into interoperability arrangements with other Union CCPs, the valuer should consider all contractual arrangements linked to the interoperability arrangement, including where the service closure of the link may draw liquidity from the CCP.

(16)

Since the valuation process has the objective of supporting the decisions made by the resolution authority before the start of resolution and where implementing the resolution strategy, the valuer should report to the resolution authority. The valuer should therefore summarise the assumptions, methodologies and outcome of the valuation in a report to the resolution authority. The report should include any information that is deemed relevant to assist the resolution authority.

(17)

To ensure a fair, prudent and realistic valuation, the valuer should assess the impact on the valuation of each resolution action that the resolution authority is likely to adopt, and should in case necessary consult with the resolution authority in order to take those into account. The valuer should further be able to consult with the resolution authority to identify the range of resolution actions being considered. If necessary, the valuer should be able to present separate valuations that reflect the impact of a sufficiently diverse range of resolution actions.

(18)

For the same reasons, valuations for the purpose of informing the determination by the competent authority or the resolution authority of whether the conditions for resolution are met should be consistent with the applicable accounting and prudential framework. However, the valuer should be able to depart from the assumptions made by the CCP’s management under which the financial statements are prepared to the extent that such departure is consistent with the applicable accounting and prudential framework.

(19)

It is appropriate to have rules that ensure that the valuation for the purpose of informing the choice of resolution actions are fair, prudent and realistic, in order to ensure that all losses are fully recognised at the moment the resolution tools are applied. The choice of the most appropriate measurement basis should be made for the particular resolution actions being considered by the resolution authority.

(20)

Valuations for the purpose of informing the choice and design of resolution actions should assess the economic value of the CCP and not its accounting value. Those valuations should consider the present value of cash flows that the CCP can reasonably expect, even where this requires departing from the accounting or prudential valuation framework. Such valuations should also consider that cash flows could arise from continuing to hold the assets, yet should take into account the potential effects of the resolution on future cash flows. Alternatively, where the CCP lacks the ability to hold the assets or their disposal is considered necessary or appropriate to achieve the resolution objectives, the valuation should reflect that those cash flows could arise from the disposal of assets, liabilities or business lines, assessed over a defined disposal period.

(21)

The disposal value should generally be understood as equivalent to the observable market price that could be obtained on the market for a particular asset or group of assets and might reflect a discount that is appropriate in view of the amount of assets being transferred. However, the valuer should be able, where appropriate, having regards to the actions to be taken under the resolution scheme, to determine the disposal value by applying a discount to such observable market price for a potential accelerated sale. Where the assets do not have a liquid market, the disposal value should be determined by reference to the observable prices on markets where similar assets are traded or to model calculations using observable market parameters with discounts for illiquidity reflected as appropriate. Where the use of the sale of business tool or the bridge CCP tool is contemplated, it should be possible to take into account reasonable expectations for franchise value when determining the disposal value.

(22)

For the purpose of ensuring consistency between the calculation of the estimate of the treatment that each class of shareholders and creditors would have been expected to receive had the institution or entity been wound up under normal insolvency proceedings, required by Article 25(5) of Regulation (EU) 2021/23, and the valuation following resolution pursuant to Article 61 of that Regulation, it is important that the valuer use the criteria set out for the latter valuation where appropriate.

(23)

A provisional valuation pursuant to Article 26 of Regulation (EU) 2021/23 that forms the basis of the decision on the taking of the appropriate resolution action is to include a buffer aimed at approximating the amount of additional losses. That buffer should be based on a fair, prudent and realistic assessment of those additional losses. The decisions and assumptions supporting the calculation of the buffer should be fully explained and substantiated in the valuation report.

(24)

The buffer should not bias the assessment to be made by the resolution authority, including whether the conditions for resolution laid down in Article 22 of Regulation (EU) 2021/23 are met, as well as when making an informed decision on the appropriate resolution actions to be taken.

(25)

The valuation under Article 61 of Regulation (EU) 2021/23 is to be carried out by a valuer meeting the conditions set out in Article 25 of that Regulation as soon as possible after the resolution action or actions have been effected, even though its completion could take some time. That valuation should be based on available information relevant to the date when the decision to resolve a CCP is adopted in order to appropriately reflect specific circumstances, such as distressed market conditions, existing at that resolution decision date. Information obtained after the resolution decision date should only be used where it could reasonably have been known at that date.

(26)

In order to ensure that a comprehensive and credible valuation is carried out, the valuer should have access to any appropriate legal documentation, including a list of all identifiable assets, claims, contingent assets and contingent claims against the entity classified according to their priority under normal insolvency proceedings. The valuer should be allowed to enter into arrangements to obtain specialist advice or expertise as required by the circumstances.

(27)

For the purpose of determining the treatment that shareholders, clearing members and other creditors would have received had the CCP been wound up under normal insolvency proceedings, the valuer should assess the discounted amount of expected cash flows that each shareholder, clearing member and other creditor would have received under normal insolvency proceedings, following the full application of the applicable contractual obligations and other arrangements in the CCP’s operating rules. The valuer should disregard any provision of extraordinary public financial support to the CCP or central bank liquidity assistance provided under non-standard collateralisation, tenor and interest terms.

(28)

The valuer should also take into account a commercially reasonable estimate of the direct replacement costs incurred by clearing members under normal insolvency proceedings. Such costs should cover the cost incurred when replacing transactions open at the CCP prior to insolvency, including credit, liquidity and transaction costs, as well as operating costs associated with new connections with a different counterparty, and any material cost of funding for the new collateral requirements associated with those transactions.

(29)

The provisions in this Regulation are closely linked to each other, since they deal with the circumstances and methodology for the valuation of assets and liabilities in the context of the resolution of a CCP. To ensure coherence between those provisions, which should enter into force simultaneously, and to facilitate the resolution process, there is a need for CCPs, clearing members, their clients, authorities and market participants, including investors that are non-Union residents, to have a comprehensive view and compact access to their obligations and rights. It is therefore appropriate to include the relevant regulatory technical standards required by Articles 25(6), 26(4) and 61(5) of Regulation (EU) 2021/23 in a single Regulation.

(30)

This Regulation is based on the draft regulatory technical standards submitted to the Commission by the European Securities and Markets Authority.

(31)

The European Securities and Markets Authority has conducted open public consultations on the draft regulatory technical standards on which this Regulation is based, analysed the potential related costs and benefits and requested the advice of the Securities and Markets Stakeholder Group established in accordance with Article 37 of Regulation (EU) No 1095/2010 of the European Parliament and of the Council (3),