The European Securities and Markets Authority (ESMA) has published a briefing on the operationalisation of the write-down and conversion (WDC) tool for central counterparties (CCPs), a key component of the EU's CCP resolution framework. The document, dated 13 May 2026, provides guidance to resolution authorities on how to apply the tool to instruments of ownership, debt instruments, and other unsecured liabilities in the event of a CCP failure.
The briefing is a reference document intended to support consistent implementation of the CCP Recovery and Resolution Regulation (CCPRRR). It outlines the mechanics of the WDC tool, including valuation considerations, the hierarchy of claims, and the interaction with other resolution tools. The document is non-binding but aims to harmonise practices across EU member states.
Policy orientations and trade-offs
The briefing emphasises the need to balance financial stability with creditor rights. The WDC tool allows resolution authorities to write down or convert CCP liabilities to absorb losses and recapitalise the CCP, reducing the need for taxpayer-funded bailouts. However, it also raises concerns about legal certainty for creditors and potential market disruption if applied unpredictably. ESMA stresses the importance of clear communication and pre-defined triggers to mitigate these risks.
Impact on stakeholders
- CCPs: The tool introduces a credible resolution mechanism, potentially lowering their funding costs by reducing implicit state guarantees. However, CCPs may face increased compliance costs and pressure to maintain loss-absorbing capacity. - Clearing members and investors: Holders of CCP debt or equity instruments face the risk of write-down or conversion, which could affect their investment decisions and risk management. The briefing provides clarity on the hierarchy of claims, which may help pricing. - Resolution authorities: The guidance supports consistent application of the tool across the EU, reducing legal uncertainty and cross-border frictions. However, authorities must develop detailed operational procedures and valuation capabilities. - EU taxpayers: The tool reduces the likelihood of public funds being used to rescue failing CCPs, aligning with the broader EU policy of shifting resolution costs to private stakeholders.
Expected institutional follow-up
The briefing is part of ESMA's ongoing work to operationalise the CCP resolution framework. It follows the adoption of the CCPRRR in 2021 and subsequent regulatory technical standards. ESMA may issue further guidance or conduct peer reviews to assess implementation. National resolution authorities are expected to incorporate the briefing into their resolution planning and testing exercises.
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