               8.4.2020

               EN

               Official Journal of the European Union

               C 118/165

      P8_TA(2018)0312
      73rd Session of the UN General Assembly
      European Parliament recommendation of 5 July 2018 to the Council on the 73rd session of the United Nations General Assembly (2018/2040(INI))
      (2020/C 118/26)

         The European Parliament,

                  —

                  having regard to the Charter of the United Nations,

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                  having regard to the UN resolution adopted on 3 April 2006 by the General Assembly establishing a Human Rights Council,

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                  having regard to the Treaty on European Union (TEU), in particular Articles 21, 34 and 36 thereof,

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                  having regard to the EU Annual Report on Human Rights and Democracy in the World in 2016 and the European Union’s policy on the matter,

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                  having regard to the Universal Declaration of Human Rights, its preamble and Article 18, and to the UN Human Rights Conventions and the optional protocols thereto,

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                  having regard to its recommendation to the Council of 5 July 2017 on the 72nd session of the United Nations General Assembly (1),

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                  having regard to the UN resolution adopted on 3 May 2011 by the General Assembly on the participation of the European Union in the work of the United Nations, which grants the EU the right to intervene in the UN General Assembly, to present proposals and amendments orally, which will be put to a vote at the request of a Member State, and to exercise the right to reply,

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                  having regard to the Council conclusions of 17 July 2017 on the EU priorities for the 72nd UN General Assembly,

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                  having regard to the New York Declaration for Refugees and Migrants of 19 September 2016,

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                  having regard to the UN Security Council (UNSC) Resolutions 1325 (2000), 1820 (2009), 1888 (2009), 1889 (2010), 1960 (2011), 2106 (2013), 2122 (2013) and 2242 (2015) on Women, Peace and Security,

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                  having regard to the key principles enshrined in the Global Strategy for the EU’s Foreign and Security Policy of June 2016, particularly those pertaining to the sovereignty, territorial integrity, and the inviolability of state borders which are equally respected by all participating states,

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                  having regard to its resolution of 13 December 2017 on the Annual Report on the implementation of the Common Foreign and Security Policy (2),

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                  having regard to the United Nations 2030 Agenda for Sustainable Development and to the Sustainable Development Goals (SDGs),

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                  having regard to Rule 113 of its Rules of Procedure,

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                  having regard to the report of the Committee on Foreign Affairs (A8-0230/2018),

                  A.

                  whereas the EU and its Member States remain fully committed to multilateralism, global governance, the promotion of UN core values as an integral part of the EU’s external policy, and the three pillars of the UN system: Human Rights, Peace and Security, and Development; whereas a multilateral system founded on universal rules and values is best suited to addressing crises, challenges and threats; whereas the very future of the multilateral system is facing unprecedented challenges;

                  B.

                  whereas EU’s Global Strategy reflects the level of today’s global challenges, which require a strong and more efficient UN and a deepening of cooperation at Member State level both within the EU and the UN;

                  C.

                  whereas EU Member States need to make every effort to coordinate their action in the organs and bodies of the UN system and speak with one voice based on international human rights law and the core values of the EU; whereas this cooperation needs to be based on common efforts to prevent the further escalation of ongoing conflicts and to support their solution, to promote effective disarmament and arms control, in particular as far as nuclear arsenals are concerned, to implement the SDGs and the Paris Agreement on Climate Change, and to contribute to a rule-based international order, following the mandate contained in Article 34.1 TEU;

                  D.

                  whereas the global political order and the security environment are rapidly evolving and require global responses; whereas the United Nations remain at the core of the multilateral system of cooperation between its Member States to meet these challenges and is best suited to addressing international crises, global challenges and threats;

                  E.

                  whereas the world is facing a range of global challenges related to ongoing and emerging conflicts and their consequences, such as climate change and terrorism, which need to be tackled on a global scale; whereas the current structure of the UNSC is still based on an outdated political scenario and its decision-making process does not adequately reflect a changing global reality; whereas the EU and its Member States were instrumental in shaping the global UN 2030 Agenda, and the EU remains committed to being a front-runner in mobilising all means of implementation and a strong follow-up, monitoring and review mechanism to ensure progress and accountability; whereas this is reflected in the EU’s external action and other policies across EU financial instruments;

                  F.

                  whereas the three pillars of the UN: Peace and Security, Development, Human Rights and the Rule of Law are inseparable and mutually reinforcing; whereas the UN’s original purpose of maintaining peace has been challenged by continuous complex crises;

                  G.

                  whereas the UN’s burdensome bureaucratic procedures and complex and rigid structure have sometimes hindered the proper functioning of the institution and its ability to give a rapid response to crises and global challenges;

                  H.

                  whereas responding successfully to global crises, threats and challenges requires an efficient multilateral system, founded on universal rules and values;

                  I.

                  whereas the international order based on cooperation, dialogue, and human rights is being called into question by several nationalist and protectionist movements around the world;

                  J.

                  whereas the ever growing number of tasks for the UN system demands adequate financing by its Member States; whereas there is a growing gap between the organisation’s needs and the funding provided to it; whereas, in view of the intention of the United States to cut its contributions to the UN budget, the EU and its Member States remain collectively the single largest financial contributor and should actively support the UN Secretary-General (UNSG) in his efforts to secure the proper functioning and financing of the UN, with the primary aims of eradicating poverty, promoting long-term peace and stability, defending human rights, combating social inequalities, and providing humanitarian assistance to populations, countries and regions that are confronted with all types of crises, whether natural or human-made; whereas EU contributions to the UN should be more visible; whereas UN agencies, including the United Nations Relief and Works Agency for Palestine Refugees in the Near East (UNRWA), have suffered important financial cuts; whereas the current overall level of funding of the UN remains inadequate in order to allow the organisation to implement its mandate and to face the current global challenges;

                  K.

                  whereas democracy, human rights, and the rule of law are coming under increasing threat in different regions of the world, and civil society space is shrinking in many UN Member States; whereas human rights defenders and civil society activists are facing increasing threats and risks around the world for their legitimate work;

                  L.

                  whereas the promotion and protection of human rights is at the heart of multilateralism and a central pillar of the UN system; whereas the EU is a strong supporter of all human rights, which are universal, indivisible, interdependent and inter-related; whereas the EU is one of the most dedicated defenders and promoters of human rights, fundamental freedoms, cultural values and diversity, democracy and the rule of law; whereas these values are coming under increasing threat in different regions of the world; whereas human rights defenders and civil society activists are facing increasing threats and risks for their legitimate work and are facing increasing reprisals for interacting with UN bodies and mechanisms; whereas the international community and the EU must step up their efforts to provide protection and support for human rights defenders, and uphold international norms of democracy, human rights, and the rule of law; especially with regard to the rights of those belonging to minority groups or those in vulnerable situations including women, children, young people, ethnic, racial or religious minorities, migrants, refugees and internally displaced persons (IDPs), people with disabilities, lesbian, gay, bisexual, transgender and intersex (LGBTI) people and indigenous peoples;

                  1.

                  Recommends the following to the Council:

                        Reform of the UN system, including reform of the Security Council

                              (a)

                              to actively support the UNSG’s three pillar reform agenda with the aim of making the UN system truly coordinated, efficient, effective, integrated, transparent and accountable; to support the streamlining of the peace and security structure, which needs to become more efficient, focused, properly funded, and operational with power divided in a more balanced way and with more effective diversity in terms of regional representation in all its bodies;

                              (b)

                              to support reduced bureaucracy, simplified procedures and decentralised decision-making, with greater transparency and accountability on the missions and work of UN staff, especially with regard to their operations in the field;

                              (c)

                              to support the UNSG’s efforts in making a substantial change in order to align the UN development system with the priorities of Agenda 2030 and the SDGs, and the Responsibility to Protect (R2P), and make it fit for the purpose of better supporting their implementation;

                              (d)

                              to call on UN Member States to empower both the UNSG and Deputy SG and their respective authorities in the process of streamlining the UN management system, in order to promote greater efficiency, flexibility, responsiveness, and value for money of the UN and its agencies;

                              (e)

                              to remind all UN Member States of their obligation to maintain their financial efforts to support all UN agencies and meet their commitments on development aid spending, while increasing effectiveness and efficiency, and holding governments to account for the implementation of the global SDGs;

                              (f)

                              to actively support the UNSG’s efforts in the implementation of the UN Strategy on Gender Parity as an essential tool to ensure the equal representation of women in the UN system; to appoint more women and particularly women belonging to minority groups to senior management posts at UN HQ level and to adopt gender mainstreaming and gender budgeting; to call on the EU and the UN to appoint more female police officers and soldiers to missions and operations; to push for intersectional gender advisors for individual missions and operations and specific action plans, which design how UNSC Resolutions 1325 and 2242 are being implemented at the level of each mission and operation; to ensure that all UN forces have the same minimum education and competence requirements, and that it must include a clear gender, LGBTI, and anti-racist perspective, with zero tolerance for all forms of sexual exploitation and violence, including an effective whistle-blower function within the UN to anonymously report offenses committed by UN personnel against UN personnel and locals alike;

                              (g)

                              to underline the importance EU Member States attach to coordination of their action in the organs and bodies of the UN system;

                              (h)

                              to call for a comprehensive reform of the UNSC to improve its representativeness on the basis of a broad consensus in order to ensure it responds more quickly and effectively to threats to international peace and security; to promote the revitalisation of the work of the General Assembly and improved coordination and coherence of the actions of all UN institutions;

                              (i)

                              to redouble efforts to reform the UNSC in particular, through a significant limitation or by regulating the use of the right to veto, notably in cases where there is evidence of war crimes and crimes against humanity, which has been obstructing the decision-making process and through a change in the composition of its membership to better reflect today’s global order, inter alia through a permanent seat for the European Union;

                              (j)

                              to call for the EU and its Member States to speak with one voice; supports efforts made by the European External Action Service (EEAS), the EU Delegations in New York and Geneva and the Member States to improve the coordination of EU positions and to reach common EU stance when voting, in order to improve EU coherence and credibility at the UN;

                              (k)

                              to reiterate its support for the work of UN Special Procedures of the Human Rights Council, including the Special Rapporteurs, and other thematic and country-specific human rights mechanisms and its call on all UN State Parties to extend open invitations to all Special Rapporteurs to visit their countries;

                              (l)

                              to support the establishment of an open and inclusive intergovernmental preparatory process under the auspices of the UN General Assembly for a UN 2020 summit, on the occasion of the UN’s 75th anniversary, that will consider comprehensive reform measures for a renewal and strengthening of the United Nations;

                              (m)

                              to advocate the establishment of a United Nations Parliamentary Assembly (UNPA) within the UN system in order to increase the democratic character, the democratic accountability and the transparency of global governance and to allow for better citizen participation in the activities of the UN and, in particular, to contribute to the successful implementation of the UN Agenda 2030 and the SDGs;

                        Peace and security

                              (n)

                              to call on the EU and the UN to play complementary and reinforcing roles every time peace and security are threatened; to initiate structured political cooperation between the EU and the UN;

                              (o)

                              to promote stronger commitments from Member States to peace and security both at international and internal level; to support the UNSG in his efforts to increase UN involvement in peace negotiations; to call on the UN to prioritise prevention, mediation and political solutions to conflicts while addressing their root causes and drivers; to continue to support UN special envoys’ work, actions and initiatives aimed at solving these conflicts; to increase Member State support for UN peacekeeping and peacebuilding operations, in particular by contributing personnel and equipment, and to enhance the EU’s facilitating role in this respect; to ensure better visibility for this support and contribution; to ensure that all UN peacekeeping and peacebuilding operations have a human rights mandate and adequate staff to carry out this function;

                              (p)

                              to deepen the cooperation with the UN in the Strategic Partnership on Peacekeeping and Crisis Management; to encourage EU-UN cooperation in the Security Sector Reform (SSR); to call on the UN to make peacekeeping operations more credible and transparent by establishing and reinforcing effective mechanisms to prevent possible abuses by UN personnel and to hold them accountable; to adopt a multilateral approach throughout the overall process of the missions; to enhance interaction with local communities, ensuring their protection and relief; to ensure that protection of civilians is at the core of peacekeeping mandates; to strengthen support for local actors by empowering the most vulnerable groups to act as agents of change and create the spaces to involve them in all phases of humanitarian and peacebuilding work; to call on the UN to reduce the overall environmental impact of UN peacekeeping operations and achieve improved cost efficiency, safety and security both for troops and for the civilians of host countries;

                              (q)

                              to stress that global and regional threats and common global concerns require a quicker response and responsibilities taken by the whole international community; to underline that where a state is unable or unwilling to fulfil its responsibility to protect, this responsibility falls to the international community, including all UNSC permanent members, and involving all other major emerging economies and developing countries, and for those violating international law to be brought to justice accordingly; to strengthen the capacities of the Blue Helmets; to call for the EU to encourage emerging and developing countries to join the international community when it takes action under its R2P;

                              (r)

                              to welcome cooperation between the EU, UN and other intergovernmental organisations, such as the trilateral cooperation between the African Union (AU), the EU and the UN, as a strong means of strengthening multilateralism and global governance and providing assistance to those in need of international protection, while ensuring respect for human rights and international humanitarian law, and to call for a concerted effort towards capacity building in this regard by the EU, UN and AU;

                              (s)

                              to continue to promote a broad definition of the human security concept and of R2P, and to further promote a strong UN role in their implementation; to further strengthen the role of R2P as an important principle in UN Member States’ work on conflict resolution, human rights and development; to continue to support the efforts to further operationalise R2P and to support the UN in continuing to play a critical role in assisting countries in the implementation of R2P in order to uphold human rights, the rule of law and international humanitarian law; to recall the EU’s commitment to implementing the R2P, preventing and halting human rights violations in the context of atrocities;

                              (t)

                              to use all instruments at its disposal to enhance compliance by state and non-state actors’ actions with international humanitarian law (IHL); to support efforts led by the International Committee of the Red Cross towards the establishment of an effective mechanism for strengthening compliance with IHL;

                              (u)

                              to reiterate its unequivocal condemnation of terrorism and its full support for actions aimed at the defeat and eradication of terrorist organisations, in particular Daesh/ISIS, which pose a clear threat to regional and international security; to work with the UN General Assembly and the UNSC to combat the financing of terrorism, taking into account the Parliament’s recommendation of 1 March 2018 (3) and to build mechanisms to designate terrorist individuals and organisations and strengthen asset-freezing mechanisms worldwide to support the United Nations Interregional Crime and Justice Research Institute (UNICRI) in the implementation and operationalisation of the Global Counterterrorism Forum (GCTF), building on the Global Initiative against Transnational Organised Crime; to strengthen joint EU-UN efforts in combating the root causes of terrorism, particularly in countering hybrid threats and developing research and capacity building in cyber defence; to rely on the existing initiatives set up by local partners to design, implement, and develop approaches countering radicalisation and recruitment to terrorism; to step up efforts to clamp down on recruitment and fight terrorist propaganda, both of which are carried out through social media platforms and networks of radicalised hate preachers; to support actions strengthening the resilience of communities vulnerable to radicalisation, including by addressing the economic, social, cultural, and political causes which lead to it; to strengthen the efficacy of international police, legal and judicial cooperation in the fight against terrorism and transnational crime; to promote education as a tool for preventing terrorism; to support counter-radicalisation and de-radicalisation policies in line with the UN Plan of Action to Prevent Violent Extremism; to support an enhanced EU contribution to UN capacity building initiatives in relation to the fight against foreign terrorist fighters and violent extremism;

                              (v)

                              to push for stronger multilateral commitments to find sustainable political solutions to current conflicts in the Middle East and North Africa; to continue to support UN special envoys’ work, actions and initiatives aimed at solving these conflicts; to back the EU’s role in the humanitarian field; to call for continued humanitarian, financial and political assistance from the international community; to hold to account those responsible for violations of international humanitarian and human rights law and to work towards the immediate cessation of violence; to insist that a Syrian-led political process aiming at free and fair elections, facilitated and monitored by the UN and held on the basis of a new constitution, is the only way to bring peace to the country; to stress that a nationwide inclusive ceasefire and a peaceful mutually acceptable solution to the Syrian crisis can be achieved under UN auspices and, as provided for in the 2012 Geneva Communiqué and UNSC Resolution 2254 (2015), with the support of the UN Special Envoy for Syria; to urge the international community to do everything in its power in order to strongly condemn those responsible for war crimes and crimes against humanity committed during the Syrian conflict; to support the UNSG’s call for the establishment of a new, impartial and independent panel to identify the perpetrators of chemical attacks in Syria, as the absence of such a body increases the risks of military escalation; to support the UN peace plan initiative in Yemen and to tackle the ongoing humanitarian crisis as a matter of urgency; to call on all parties to respect the human rights and freedoms of all Yemeni citizens, and to stress the need for a negotiated political settlement through inclusive intra-Yemeni dialogue;

                              (w)

                              to ensure that the UN General Assembly provides, in cooperation with the EU, all positive instruments to ensure that a two-state solution, on the basis of the 1967 borders, with Jerusalem as capital of both states, and a secure State of Israel with secure and recognised borders, and an independent, democratic, contiguous and viable State of Palestine, living side by side in peace and security, is sustainable and effective;

                              (x)

                              to support UN efforts to secure a fair and lasting settlement of the Western Sahara conflict, on the basis of the right to self-determination of the Sahrawi people and in accordance with the relevant UN resolutions;

                              (y)

                              to keep addressing the major security threats in the Sahel, Sahara, Lake Chad and Horn of Africa regions with a view to eradicating the terrorist threat caused by ISIL/Daesh and al-Qaeda affiliates and by Boko Haram or any other affiliated terrorist groups;

                              (z)

                              to uphold the nuclear agreement between Iran and the Security Council Members plus Germany as an important success of international and, notably, EU diplomacy and to continue putting pressure on the United States to deliver on its practical implementation;

                              (aa)

                              to continue to call for full respect for the sovereignty of internationally recognised borders and the territorial integrity of Georgia, Moldova and Ukraine, in light of the violations of international law in these areas; to support and reinvigorate diplomatic efforts for a peaceful and sustainable settlement of these ongoing and frozen conflicts; to urge the international community to implement fully the policy of non-recognition of the illegal annexation of Crimea;

                              (ab)

                              to support the intra-Korean talks in their efforts towards the denuclearisation of the Korean peninsula; to call on all international actors involved to actively and positively contribute towards this goal on the basis of dialogue;

                              (ac)

                              to urge the General Assembly and the UNSC to discuss the tensions in the South China Sea with the intention of encouraging all parties concerned to finalise the negotiation of a code of conduct;

                        Women, Peace and Security Agenda

                              (ad)

                              to call on all Member States to continue to support and implement the eight above mentioned UNSC resolutions which make up the Women, Peace and Security Agenda, and guide work to achieve full gender equality and ensure women’s participation, protection and rights across the conflict cycle, from conflict prevention through post-conflict reconstruction, while adopting a victim-centred approach to reduce further harm to women and girls directly affected by conflict;

                              (ae)

                              to recall that women’s participation in peace processes remains one of the most unfulfilled aspects of the Women, Peace and Security agenda, in spite of women being the primary victims of security, political and humanitarian crises; to highlight that UNSC Resolution 1325 on Women, Peace and Security has not achieved its primary objective of protecting women and substantially increasing their participation in political and decision-making processes; to recall that equality between women and men is a core principle of the European Union and its Member States, and fostering it is one of the Union’s principal objectives; to continue to promote equality and non-discrimination between women and men, and to actively promote the support of further actions against violations of LGBTI rights; to involve the most vulnerable people in all levels of decision-making and all processes;

                              (af)

                              to recall that armed conflict leaves both men and women vulnerable, but puts women at greater risk of economic and sexual exploitation, forced labour, displacement and detention and sexual violence such as rape, which is used as a tactic of war and constitutes a war crime; to ensure safe medical assistance for cases of war rape; to call for strengthened protection of minors, women, girls and the elderly in conflict situations, especially as regards sexual violence, and child, early and forced marriage, as well as of men and boy victims, whose real numbers in conflict-affected settings are severely underestimated according to the WHO and international studies (4); to urge all UN Member States to make all necessary financial and human resources available to assist the population in conflict areas;

                              (ag)

                              to call on the UN to set up efficient procedures for reporting concerns or evidence of abuses, fraud, corruption and misconduct related to activities carried out by UN military and civilian personnel during peacekeeping missions and to tackle these cases through specific investigations in a timely manner; to urgently change the fact that legal actions regarding alleged abuses currently remain purely voluntary and dependent on the troop-contributing country; to urgently address all aspects of the 15 May 2015 UN Evaluation Report on Enforcement and Remedial Assistance Efforts for Sexual Exploitation and Abuse by the United Nations and Related Personnel in Peacekeeping Operations without delay and to hold perpetrators to account; to investigate, prosecute and sentence any military and civilian personnel who have committed acts of sexual violence without delay and with the firmest resolve; to encourage further training of UN peacekeeping personnel on the International Protocol on the Documentation and Investigation of Sexual Violence in Conflict, in order to promote expertise on sexual violence issues;

                              (ah)

                              to support and strengthen international efforts through the UN to ensure gender analysis as well as gender and human rights mainstreaming in all UN activities, notably in peacekeeping operations, humanitarian operations, post-conflict reconstruction and reconciliation processes; to develop indicators and to implement monitoring tools to measure progress on the participation of women in peace and security building, including in peacekeeping operations, and to ensure accountability, as well as to provide effective engagement with communities and to ensure improved cultures and behaviours which are also in line with the UN Secretary General’s High Level Panel on Women’s Economic Empowerment; to ensure that the implementation of the Women, Peace and Security agenda includes adequate funding and provides support for making women the central component in all efforts to address global challenges, including rising violent extremism, conflict prevention and mediation, humanitarian crises, poverty, climate change, migration, sustainable development, peace and security;

                              (ai)

                              to support and strengthen international efforts through the UN to end the abuse of children in armed conflicts and to more effectively address the impact of conflict and post-conflict situations on girls; to support the role of the UN Working Group on Children in Armed Conflict in order to deepen support for the rights of young people affected by war, and to support the UN ‘Children Not Soldiers’ campaign with a view to ending the recruitment and use of children by government armed forces and non-state actors in conflict;

                              (aj)

                              to maintain its commitment with the UN to monitor and effectively implement the Spotlight initiative, the aim of which is to put an end to all forms of violence against women and girls;

                        Conflict prevention and mediation

                              (ak)

                              to provide all means to proactively support the UNSG’s priorities for conflict prevention and mediation (5), by such initiatives as the establishment of the High-Level Advisory Board on Mediation, and in line with the priorities of the UN's Special Political Missions and Peacebuilding Fund tools; to ensure that human rights are at the core of conflict prevention and mediation policies;

                              (al)

                              to strengthen the operational side of EU and UN priorities for conflict prevention and reduction, including by ensuring the availability of experienced mediators and mediation advisers, including women envoys and senior officials, and to ensure more effective coordination of the UN’s political, humanitarian, security, and development tools;

                              (am)

                              to consider that women are conspicuously underrepresented at the peace table, where crucial decisions about post-conflict recovery and governance are made, despite the fact that when women have an explicit role in peace processes there is a 20 % increase in the probability of an agreement lasting at least 2 years, and a 35 % increase in the probability of an agreement lasting at least 15 years;

                              (an)

                              to strongly support the Youth, Peace and Security Agenda and its objective of giving youth a greater voice in decision-making at the local, national, regional and international levels; to support in this regard the setting up of mechanisms that would enable young people to participate meaningfully in peace processes;

                              (ao)

                              to further strengthen EU-UN cooperation on devising instruments to address the recurrent problem of election-related violence, including by building on the experience of MEPs in Election Observation Missions and parliamentary pre-election dialogues with political parties, in order to give greater credibility to elections in those countries seeking to strengthen their democratic procedures, as well as to send a strong message to those seeking to abuse the system;

                              (ap)

                              to recall the significant contributions made by the EU (external financing instruments) to the UN system, including global peace, the rule of law and human rights and the development agenda;

                              (aq)

                              to strongly support the Secretary General’s proposals to make the UN Development System more effective and to define a supportive position in view of the proposed funding compact in return for increased effectiveness, transparency and accountability;

                        Non-proliferation, arms control and disarmament

                              (ar)

                              to systematically support all UN actions related to disarmament, confidence-building, non-proliferation and counter-proliferation of weapons of mass destruction, including the development, production, acquisition, stockpiling, retention, transfer or use of chemical weapons by a state party or non-state actor;

                              (as)

                              to express concern at the erosion of the existing arms control and disarmament system and its legal instruments; to support all efforts to put the arms control and disarmament agenda back on course, including by reviving the Conference on Disarmament; to promote nuclear non-proliferation through the 2020 review process by bringing the Comprehensive Nuclear Test-Ban Treaty into force without delay; to undertake efforts to enforce the Chemical Weapons Convention; to reaffirm the commitment to its objectives and to encourage all UN Member States to ratify or accede to it; to strengthen the Organisation for the Prohibition of Chemical Weapons (OPCW) and its work by ensuring it has appropriate financial resources and staff to fulfil its objectives; to ensure that in cases where the use of chemical weapons is reported, perpetrators are brought to justice; to ensure accountability for violations of disarmament and arms control treaties by existing arms control mechanisms and disarmament instruments; to support the Treaty on the Prohibition of Nuclear Weapons backed in 2017 by 122 UN Member States and to work for the signing and ratification of this Treaty by all UN Member States; to urgently advance nuclear disarmament both regionally and globally in line with Parliament’s resolution of 27 October 2016 (6) which calls on all EU Member States to support the United Nations Conference to Negotiate a Legally Binding Instrument to Prohibit Nuclear Weapons; to support UN efforts to prevent non-state actors and terrorist groups from developing, manufacturing, acquiring or transferring weapons of mass destruction and their delivery systems; to insist on full compliance with the Treaty on the Non-Proliferation of Nuclear Weapons (NPT), the Chemical Weapons Convention and the Biological Weapons Convention;

                              (at)

                              to fully implement the Arms Trade Treaty (ATT) and to encourage all UN Member States to ratify or accede to it;

                              (au)

                              to work towards more effective action against the diversion of, and illicit trade in, weapons and ammunition, including small arms and light weapons, in particular by developing a weapons tracking system; to request that UN members actively take steps towards global disarmament and towards the prevention of arms races;

                              (av)

                              to pay special attention to technological progress in the field of the weaponisation of robotics and, in particular, on armed robots and drones and their conformity with international law; to establish a legal framework on drones and armed robots in line with existing IHL to prevent this technology from being misused in illegal activities by state and non-state actors; to promote the start of effective negotiations on the prohibition of drones and armed robots which enable strikes to be carried out without human intervention; to promote a UN-based legal framework which strictly stipulates that the use of armed drones has to respect international humanitarian and human rights law; to strongly condemn the widespread human rights abuses and violations of international humanitarian law; to call for greater protection of human rights and fundamental freedoms in every dimension of their expression, including in the context of new technologies; to work towards an international ban on weapon systems that lack human control over the use of force as requested by Parliament on various occasions and, in preparation of relevant meetings at UN level, to urgently develop and adopt a common position on autonomous weapon systems and to speak at relevant fora with one voice and act accordingly;

                              (aw)

                              to encourage all UN Member States to sign and ratify the Convention on the Prohibition of the Use, Stockpiling, Production, and Transfer of Anti-Personnel Mines and on their Destruction;

                              (ax)

                              to work, with reference to UN Environment Assembly resolution UNEP/EA.3/Res.1 and UN Human Rights Council resolution 34/20, towards the clarification and development of post-conflict obligations for the clearance and management of contamination from the use of depleted uranium weapons, and the assistance of communities affected by their use;

                        Human rights, democracy and the rule of law

                              (ay)

                              to recall that human rights are indivisible, interdependent and interrelated; to call on the EU and the UN not only to firmly condemn the disturbing global trend towards a marginalisation and denial of human rights and democracy in order to counter any negative trends, including with regard to the space for civil society, but also to make effective use of the legal instruments available, notably Article 2 of EU association agreements with third countries, when appropriate; to urge all UN Member States to ratify and effectively implement all core UN human rights conventions, including the UN Convention Against Torture and the Optional Protocol thereto, the Optional Protocols to the International Covenant on Civil and Political Rights and the International Covenant of Economic, Social and Cultural Rights establishing complaint and inquiry mechanisms, and to comply with the reporting obligations under these instruments and the commitment to cooperate in good faith with UN human rights mechanisms; to draw attention to the global backlash against human rights defenders and advocates of democratisation;

                              (az)

                              to ensure that human rights reforms continue to be fully integrated within the UN’s three pillars of reform; to support mainstreaming of the human rights dimension in the work of the United Nations;

                              (ba)

                              to promote the freedom of deists and theists as well as of people who regard themselves as atheists, agnostics, humanists and free thinkers;

                              (bb)

                              to continue to advocate freedom of religion or belief; to call for greater efforts to protect the rights of religious and other minorities; to call for greater protection of religious minorities against persecution and violence; to call for the repeal of laws criminalising blasphemy or apostasy that serve as a pretext for the persecution of religious minorities and non-believers; to support the work of the Special Rapporteur on freedom of religion or belief; to actively work for UN recognition of the genocide against religious and other minorities committed by ISIL/Daesh, and for referral to the International Criminal Court (ICC) of cases of suspected crimes against humanity, war crimes and genocide;

                              (bc)

                              to encourage the United Nations Human Rights Council (UNHRC) to supervise respect for human rights by its own Member States, in order to avoid the mistakes of the past such as giving membership to gross violators of human rights and those adopting anti-Semitic political positions;

                              (bd)

                              to encourage all UN Member States to ensure that their citizens are able to be fully involved in political, social, and economic processes — including the freedom of religion or belief — without discrimination;

                              (be)

                              to call on all national and international authorities to adopt binding instruments devoted to the effective protection of human rights as a matter of urgency and to ensure that all national and international obligations stemming from international rules are fully enforced; to reiterate the importance of the UNHRC; to recall the obligation of the General Assembly, when electing the membership of the UNHRC, to take into account candidates’ respect for the promotion and protection of human rights, the rule of law and democracy; to call for the establishment of clear human rights performance-based criteria for membership of the UNHRC;

                              (bf)

                              deeply regrets the decision of the USA to withdraw from the UNHRC; recalls the EU’s participation and support for this indispensable human rights body and urges the US administration to reconsider its decision;

                              (bg)

                              to urge all states, including EU Member States, to swiftly ratify the Optional Protocol to the International Covenant on Economic, Social and Cultural Rights establishing a complaints and inquiry mechanism;

                              (bh)

                              to work together with all UN Member States to respect the rights of freedom of expression, as mentioned in Article 19 of the Universal Declaration of Human Rights, and to emphasise the importance of a free press and media in a healthy society, and the role of every citizen therein; to stress the importance of media freedom, pluralism, media independence and the safety of journalists to counter the new challenges; to initiate a debate on finding the right balance between protecting media freedom and freedom of expression and combatting false information; to seek to protect journalists who are working on corruption cases and whose lives are in danger;

                              (bi)

                              to maintain a strong commitment to promoting an end to the death penalty worldwide; to continue to advocate zero tolerance for the death penalty; to call for a moratorium on the use of the death penalty and to further work towards its universal abolition; to denounce the increased recourse to death sentences for drug-related offences, and to call for the outlawing of use of the death penalty and summary execution as punishment for such offences;

                              (bj)

                              to support and strengthen international efforts through the UN to ensure gender analysis as well as gender and human rights mainstreaming in all UN activities; to call for the eradication of all violence and discrimination against women and girls, by also taking into account discrimination based on gender identity; to advocate and protect the rights of LGBTI people, and to call for a repeal of legislation in UN Member States which criminalises people on the grounds of their sexuality or gender identity; to encourage the Security Council to further address and strengthen LGBTI rights;

                              (bk)

                              to strengthen the role of the ICC and the international criminal justice system in order to promote accountability and to end impunity; to provide the ICC with strong diplomatic, political and financial support; to call on all UN Member States to join the ICC by ratifying and implementing the Rome Statute and to encourage the ratification of the Kampala amendments; to call on those withdrawing from the ICC to reverse their decisions; to support the ICC as a key institution for holding perpetrators to account and assisting victims in achieving justice, and to encourage strong dialogue and cooperation between the ICC, the UN and its agencies and the UN Security Council;

                              (bl)

                              to strongly condemn the judicial harassment, detention, killing, threatening and intimidation of human rights defenders (HRDs) around the world for doing their legitimate human rights work; to push for international efforts and to call on UN Member States to adopt policies providing protection and support for HRDs at risk, and enabling them to carry out their work; to adopt a policy to denounce, systematically and unequivocally, the killing of HRDs and any attempt to subject them to any form of violence, persecution, threat, harassment, disappearance, imprisonment or arbitrary arrest; to condemn those who commit or tolerate such atrocities, and to step up public diplomacy in full support of HRDs; to underline that HRDs and civil society activists are among the central actors in sustainable development; to call on UN Member States to adopt policies to provide protection and support for HRDs at risk; to recognise that environmental, land and indigenous HRDs have faced increasing threats;

                              (bm)

                              to pledge, in line with the European anti-corruption acquis, to promote anti-corruption measures and push for these to be further integrated in United Nations programmes;

                              (bn)

                              to request the EU and its Member States to work with partners on the implementation of the UN Guiding Principles on Business and Human Rights by urging all countries, including EU Member States, to develop and implement National Action Plans (NAP) obliging businesses to ensure observance of human rights; to renew its call for the EU and its Member States to be actively and constructively engaged in formulating, as soon as possible, a legally binding international instrument that regulates, in international human rights law, the activities of transnational corporations and other business enterprises in order to prevent, investigate, redress and provide access to remedy to human rights violations whenever these occur; to support a binding UN Treaty on Business and Human Rights with the aim of ensuring corporate accountability; to welcome, in that context, the work carried out by the UN Working Group on Business and Human Rights and to remind the UN, the EU and its Member States to engage constructively in order to speed up these negotiations and to address remaining EU concerns;

                              (bo)

                              to step up its efforts within the framework of the International Alliance for Torture Free-Trade, co-initiated by the EU alongside regional partners; to set up an international fund to assist countries in developing and implementing legislation banning trade in goods that could be used for torture and the death penalty; to support the establishment of an international instrument to ban the trade in such goods, drawing on the experience of Council Regulation (EC) No 1236/2005 on this issue;

                              (bp)

                              to ensure that women have access to family planning and the full range of public and universal sexual and reproductive health and rights, including modern contraception and safe and legal abortion; underscores the fact that universal access to health, in particular sexual and reproductive health and associated rights, is a fundamental human right, thereby countering the Global Gag Rule which was reinstated by the United States Government in early 2017;

                              (bq)

                              to support a human rights-based approach to disability in situations of risk in line with the United Nations Convention on the Rights of Persons with Disabilities (CRPD);

                              (br)

                              to consider that the Roma people are among the most discriminated against minorities in the world and that the discrimination is getting worse in several countries; to recall that Roma people live on all continents and the issue is thus of global concern; to call on the UN to appoint a special rapporteur on Roma issues in order to raise awareness and to ensure that UN programmes also reach Roma people;

                              (bs)

                              to call for the UN Member States, including the EU Member States, to implement the recommendations of the UN Special Rapporteur on contemporary forms of racism, racial discrimination, xenophobia and related intolerance;

                        Global Compacts for Migration and on Refugees

                              (bt)

                              to fully support the UN-led efforts to negotiate two Global Compacts for Migration and on Refugees based on the September 2016 New York Declaration for Refugees and Migrants, in order to develop a more effective international response to the issue and the corresponding process for developing a global governance regime, for enhancing coordination on international migration, human mobility, large movements of refugees and protracted refugee situations, and for putting in place durable solutions and approaches to clearly outline the importance of protecting the rights of refugees and migrants; calls on the EU Member States to unite behind such a position and to actively defend and advance the negotiations on these important issues; to recall that the SDGs contained in the UN 2030 Agenda recognise that planned and well-managed migration policies can help achieve sustainable development and inclusive growth, as well as reduce inequality within and between states;

                              (bu)

                              to push for ambitious and balanced provisions allowing for more effective international cooperation and more equitable and predictable global sharing of responsibility in dealing with migration movements and forced displacement, ensuring adequate support to refugees worldwide;

                              (bv)

                              to support all efforts to ensure robust and sustainable assistance to developing countries that host large numbers of refugees, and to ensure that refugees are offered durable solutions, including by becoming self-sustainable and being integrated into the communities in which they live; to recall that the implementation of the Global Compact provides a unique opportunity to strengthen the linkage between humanitarian aid and development policies;

                              (bw)

                              to ensure that Global Compacts are people-centred and human rights-based, and provide long-term, sustainable and comprehensive measures for the benefit of all parties involved; to pay specific attention to migrants in situations of vulnerability, such as children, women at risk, victims of human trafficking or persons with disabilities, and other groups at risk, including the LGBTI community, stressing the importance of designing migration policy from an intersectional perspective in order to respond to their particular needs; to stress the need to fully develop a renewed and horizontal gender perspective for a collective international response to refugees which addresses the specific protection needs of women, including combatting violence against women, and which enhances women’s abilities and skills in reconstruction and reconciliation; to call on the UN Member States to make a stand-alone commitment to promoting gender equality and empowerment of women and girls as a central element of the Global Compact, in line with SDG 5;

                              (bx)

                              to demand that greater efforts be made to prevent irregular migration and to fight people smuggling and human trafficking, in particular by combating criminal networks through timely and effective exchange of relevant intelligence; to improve methods to identify and protect victims and to reinforce cooperation with third countries with a view to tracking, seizing and recovering the proceeds of criminal activities in this sector; to insist at the UN level on the importance of the ratification and full implementation of the UN Convention Against Transnational Organised Crime and the protocols thereto against the smuggling of migrants by land, sea and air and to prevent, suppress and punish trafficking in persons, especially women and children;

                              (by)

                              to ensure that special attention is paid to women refugees and asylum seekers who are subjected to multiple forms of discrimination and are more vulnerable to sexual and gender-based violence both in their countries of origin and during their journeys to safer destinations; to recall that women and girls seeking asylum have specific needs and concerns which differ from those of men, and which require that the implementation of all asylum policies and procedures be gender sensitive and individualised; to call for a strengthening of child protection systems and to support concrete measures in the best interests of child refugees and migrants, based on the Convention on the Rights of the Child;

                              (bz)

                              to address the widespread phenomenon of statelessness, which poses acute human rights challenges; to ensure that this issue is adequately addressed in the current negotiations on the Global Compact;

                              (ca)

                              to continue and enhance the support, including financial support, provided to the United Nations High Commissioner for Refugees (UNHCR) in implementing its international mandate to protect refugees, including from criminal gangs and individuals involved in human trafficking and people smuggling at source and in transit countries;

                              (cb)

                              to assist Eastern Partnership countries in dealing with the problems they have been facing as a result of massive forced internal displacement from conflict areas, and to act resolutely for the protection and restoration of the rights of displaced people, including their right to return, property rights and the right to personal security;

                              (cc)

                              to continue to stress the utmost importance of education for girls and women to create economic opportunities;

                              (cd)

                              to reiterate its serious concern that hundreds of thousands of IDPs and refugees who fled their native lands in connection with protracted conflicts remain displaced, and to reaffirm the right of all IDPs and refugees to return to their places of origin in safety and dignity;

                              (ce)

                              to insist on the need to provide funding specifically for women’s participation in international decision-making processes;

                        Development

                              (cf)

                              to implement the ambitious UN Agenda 2030 for Sustainable Development and its 17 Sustainable Development Goals; to underline the leading role of the EU in the process that led to the adoption of the UN Agenda 2030 for Sustainable Development and the Addis Ababa Action Agenda; to take concrete steps to ensure the efficient implementation of the UN Agenda 2030 and the Addis Ababa Agenda as important instruments for development; to ensure that the EU and the UN continue to play a major role in implementing the UN 2030 Agenda with a view to eradicating poverty and generating collective prosperity, addressing inequalities, creating a safer and more just world, and combatting climate change and protecting the natural environment;

                              (cg)

                              to take concrete steps to ensure the efficient implementation of UN Agenda 2030 and all 17 SDGs as important instruments for prevention and sustainable development; to encourage and support countries to take ownership and establish national frameworks for the achievement of the 17 SDGs; to encourage UN Member States to reorient their budgets towards the UN 2030 Agenda for Sustainable Development; to reiterate that the EU remains the world’s leading donor of development assistance, providing EUR 75,7 billion, and to encourage the continued growth in EU collective aid underpinning the Member States’ sustained efforts to promote peace, prosperity and sustainable development worldwide; to push UN Member States to meet their commitments on development aid spending and to call for the adoption of a solid framework of indicators and the use of statistical data to evaluate the situation in developing countries, monitor progress and ensure accountability; to pursue its efforts to achieve policy coherence for development across all EU policies, which is crucial for achieving the SDGs, and to push also at the UN level for greater policy coherence in accordance with Goal 17;

                        Climate change and climate diplomacy

                              (ch)

                              to reaffirm the EU’s commitment to the Paris Agreement, to encourage all the UN Member States to ratify it and implement it effectively, and to stress the need to implement the Paris Agreement globally and by all UN Member States; to reaffirm the need for an ambitious EU climate policy and its readiness to improve the existing Nationally Determined Contributions (NDCs), including those of the EU, for 2030, as well as the necessity of developing a long-term strategy for 2050 in a timely manner, and to support any initiative in this direction; to work towards more effective action for environmental sustainability, notably in the fight against climate change, by promoting international measures and actions to preserve and improve the quality of the environment and the sustainable management of natural resources; to further raise our level of ambition regarding emissions reductions and to emphasise the role of the EU as a global leader in climate action;

                              (ci)

                              to reiterate that climate action is a main priority for the European Union; to ensure that the EU remains at the forefront of the fight against climate change and cooperates further with the UN in this area; to call on all UN members to uphold the Paris Agreement and to ensure swift implementation of the decisions taken at the 2016 UN Climate Change Conference; to step up efforts to re-engage the US in multilateral cooperation on climate change;

                              (cj)

                              to be a pro-active partner in all UN efforts to foster global partnerships and cooperation on climate change challenges, stressing that climate can be an entry point for diplomatic relations with partners with whom other agenda items are highly contested, thereby offering an opportunity to enhance stability and peace;

                              (ck)

                              to step up its climate diplomacy efforts by developing a comprehensive climate diplomacy strategy and to integrate climate action into all fields of EU external action, including trade, development cooperation, humanitarian aid and security and defence, taking into account the fact that an environmentally unsustainable system produces instability; to form a strong alliance of countries and actors that will continue to support and contribute to the objectives of limiting global warming to well below 2 oC, while pursuing efforts to limit the temperature increase to 1,5 oC;

                              (cl)

                              to recall that the impacts of climate change are experienced differently by women and men; to underline that women are more vulnerable and face higher risks and burdens for various reasons, ranging from unequal access to resources, education, job opportunities and land rights, to social and cultural norms; to stress that this should be reflected accordingly; to ensure that women play a central role in finding solutions for mitigating and adapting to climate challenges, including international climate negotiations, with a view to developing gender-sensitive responses to address underlying inequalities;

                              (cm)

                              to recall that where women have limited access to and control over production resources and restricted rights, they have fewer opportunities to shape decisions and influence policy, as has been officially recognised since the 13th Conference of the Parties on Climate Change (COP 13) held in Bali in 2007;

                              (cn)

                              to work closely with small island states and other countries facing the most serious consequences of climate change to ensure that their voices and their needs are taken into consideration in the different UN fora;

                              (co)

                              to engage in a comprehensive public debate with all UN Member States on the importance of respecting constitutional limits on presidential mandates worldwide;

                  2.

                  Instructs its President to forward this recommendation to the Council, the Vice-President of the Commission/High Representative of the Union for Foreign Affairs and Security Policy, the EU Special Representative for Human Rights, the European External Action Service, the Commission and, for information, the United Nations General Assembly and the Secretary-General of the United Nations.

         (1)  Texts adopted, P8_TA(2017)0304.

         (2)  Texts adopted, P8_TA(2017)0493.

         (3)  European Parliament recommendation of 1 March 2018 to the Council, the Commission and the Vice-President of the Commission/High Representative of the Union for Foreign Affairs and Security Policy on cutting the sources of income for jihadists — targeting the financing of terrorism, Texts adopted, P8_TA(2018)0059.

         (4)  World Health Organisation, World Report on Violence and Health, Geneva, 2002, p. 154; United Nations Office for the Coordination of Humanitarian Affairs, Discussion paper 2: The Nature, Scope and Motivation for Sexual Violence Against Men and Boys in Armed Conflict, paper presented at the UNOCHA Research Meeting on the Use of Sexual Violence in Armed Conflict: Identifying Gaps in Research to Inform More Effective Interventions, 26 June 2008.

         (5)  As set out in his first statement to the UNSC on 10 January 2017.

         (6)  OJ C 215, 19.6.2018, p. 202.


title: Recommendation of the European Systemic Risk Board of 25 May 2020 on liquidity risks arising from margin calls (ESRB/2020/6) 2020/C 238/01

text:
               20.7.2020

               EN

               Official Journal of the European Union

               C 238/1

      RECOMMENDATION OF THE EUROPEAN SYSTEMIC RISK BOARD
      of 25 May 2020
      on liquidity risks arising from margin calls
      (ESRB/2020/6)
      (2020/C 238/01)
      THE GENERAL BOARD OF THE EUROPEAN SYSTEMIC RISK BOARD,
      Having regard to the Treaty on the Functioning of the European Union,
      Having regard to Regulation (EU) No 1092/2010 of the European Parliament and of the Council of 24 November 2010 on European Union macro-prudential oversight of the financial system and establishing a European Systemic Risk Board (1), and in particular Article 3(2)(b), (d) and (f) and Articles 16 to 18 thereof,
      Having regard to Decision ESRB/2011/1 of the European Systemic Risk Board of 20 January 2011 adopting the Rules of Procedure of the European Systemic Risk Board (2), and in particular Article 15(3)(e) and Articles 18 to 20 thereof,
      Whereas:

                  (1)

                  Central clearing and exchanges of margins for non-centrally cleared transactions are of significant benefit to financial stability, particularly in terms of counterparty risk management. Greater central clearing of derivatives and collateralisation of non-centrally cleared derivatives positions have significantly strengthened the resilience of derivatives markets since the 2008 financial crisis. These reforms – led by the Financial Stability Board, on the basis of agreements reached at the G20 level – helped to ensure that recent market stress has not resulted in widespread concern about counterparty credit risk. Central clearing also maximises netting opportunities, and thus liquidity savings, including in respect of variation margin payments that mechanically reflect movements in market prices.

                  (2)

                  Market shocks, such as sharp drops in asset prices and high levels of market volatility, translate into increases in variation margins and may also lead to significant initial margin calls on positions in cash securities, commodities or derivatives. Margins are fundamental to how a central counterparty (CCP) manages counterparty credit risk and are an integral part of risk management and support systemic resilience.

                  (3)

                  Such market conditions could have major implications for the liquidity management of market participants, for their funding needs, and possibly even for their solvency if the liquidity stress leads to systematic fire sales of assets.

                  (4)

                  Ultimately, the externalities resulting from significant market movements and the corresponding margin calls may jeopardise the stability of the financial system.

                  (5)

                  The outbreak of the COVID-19 pandemic and the recent sharp increase in the volatility of the price of oil have resulted, among other things, in significant margin calls across centrally cleared and non-centrally cleared markets. Since the middle of February 2020, initial margins have increased – more significantly for listed derivatives than for over-the-counter (OTC) derivatives – in the wake of higher transaction volumes, and as a margin model’s response to potentially higher future losses due to the heightened market volatility. Furthermore, CCPs have issued calls for and collected large amounts of intraday variation margin covering market movements, with the corresponding payout often occurring only the next morning, causing liquidity to be temporarily held on the accounts of the CCPs. A significant rise in the payment and receipt of the daily variation margin on bilateral portfolios has since been recorded in March.

                  (6)

                  Many clearing members have seen a particularly marked increase in initial margins and some clearing members may have experienced increased liquidity constraints. However, no default has occurred in any CCP established in the Union. Margin calls may have had a significant impact on non-bank entities, via client clearing or in non-centrally cleared transactions, due to liquidity constraints. Looking ahead, the ability of market participants to cover margin calls will depend on future levels of volatility and the continuing resilience of their liquidity management.

                  (7)

                  Overall, concentration at the level of CCPs and clearing members and the interconnectedness between CCPs through common clearing members, liquidity providers, custodians or investment counterparts may also exacerbate liquidity risk contagion.

                  (8)

                  The technical standards and guidance on antiprocyclicality (APC margin measures) introduced pursuant to Regulation (EU) No 648/2012 of the European Parliament and of the Council (3) are directed at limiting the risk of procyclicality of CCP margin. Commission Delegated Regulation (EU) No 153/2013 (4)contains specifications on the procyclicality of margins and collateral, which national competent authorities are required to observe. The amendments to EMIR, introduced by Regulation (EU) 2019/834 of the European Parliament and of the Council (EMIR Refit) (5), enhance the transparency of margin setting between CCPs and clearing members, yet the same level of transparency is not extended to the relationship between clearing members and their clients.

                  (9)

                  The European Systemic Risk Board (ESRB) is responsible for the macroprudential oversight of the financial system within the Union. In fulfilling its mandate, the ESRB should contribute to the prevention and mitigation of systemic risks to financial stability, including those related to liquidity. In performing its task the ESRB evaluates the risks for the financial system that could emerge from large margin calls and proposes how these risks might be mitigated.

                  (10)

                  The ESRB acknowledges the benefits in terms of liquidity savings for the whole financial system related to the multilateral netting benefit provided by central clearing; the ESRB also appreciates the systemic benefit of central clearing as a critical means to reinforce financial stability by ensuring and developing sound risk management practices in terms of credit and liquidity risk.

                  (11)

                  The ESRB also acknowledges that policy action on margins must not jeopardise protection against counterparty credit risk. Counterparties, including CCP clearing members and their clients, should ensure that they maintain sufficient liquidity to meet margin calls in a timely fashion. It is, however, also beneficial, from a financial stability perspective, to ensure that CCPs’ decisions in terms of risk management do not unnecessarily burden clearing members, clearing members’ clients and other counterparties because of excessive procyclical features, thus unintentionally creating liquidity strains, that could develop into solvency issues. In response to these present recommendations, the ESRB anticipates that CCPs ensure that their risk management and resilience remain sound and continue to protect market participants against loss resulting from defaults.

                  (12)

                  Recommendations A and D are aimed at ensuring that sudden and significant (hence procyclical) changes and cliff effects relating to initial margins (including add-on margins) and collateral are limited: (i) by CCPs vis-à-vis their clearing members; (ii) by clearing members vis-à-vis their clients; and (iii) in the bilateral sphere, where they result from the mechanical reliance on credit ratings and possibly from procyclical internal credit scoring methodologies. Liquidity planning should be predictable and manageable to the extent possible by limiting unexpected and significant margin calls. Providing reasonable and enforceable notice periods for any changes in the margin and haircut protocols could ensure that market participants adapt in an orderly fashion.

                  (13)

                  Recommendation B is aimed at ensuring that CCPs capture comprehensively in their liquidity stress testing any events that could lead to them experiencing a liquidity shortfall, with a view to incentivising them to improve their management of their reliance on liquidity service providers. This will improve the overall market resilience, given that there is a large degree of concentration and interconnection among CCPs and their liquidity service providers, and that prudent liquidity management at individual CCP level in this regard would enhance risk management from a systemic and macroprudential, perspective.

                  (14)

                  Recommendation C is aimed at ensuring that CCPs, while maintaining their financial resilience, limit the asymmetry in the payment of variation margins collected intraday – and that they design their margin frameworks and schedules so as to be predictable and avoid excessive liquidity constraints for clearing members that could lead to default events.

                  (15)

                  This Recommendation is without prejudice to the monetary policy mandates of the central banks in the Union.

                  (16)

                  Recommendations of the ESRB are published after the addressees have been informed, and after the General Board has informed the Council of the European Union of its intention to do so and provided the Council with an opportunity to react,

            HAS ADOPTED THIS RECOMMENDATION:
      SECTION 1

         RECOMMENDATIONS

         Recommendation A – Limiting cliff effects in relation to the demand for collateral

                  1.

                  It is recommended that the competent authorities seek to ensure that CCPs analyse the performance of their policies required by Article 28 of Delegated Regulation (EU) No 153/2013 during periods of acute stress and report their findings to their competent authority.

                  2.

                  It is recommended that the competent authorities seek to ensure, taking into consideration the findings of the analyses carried out in compliance with Recommendation A(1), that to the extent permitted by law and consistent with CCPs’ financial resilience:

                              (i)

                              CCPs’ models and parameters for setting margin requirements and CCPs’ policies and procedures for the acceptance and valuation of collateral and for determining prudent haircuts do not unnecessarily and excessively result in sudden and significant changes leading to cliff effects in initial margins, including add-on margins, and collateral. CCPs should ensure that their models, parameters, policies and procedures:

                                          (a)

                                          use a granular scale for internal credit scoring models and adopt a progressive approach that implements changes to margin requirements, including add-ons, and collateral arrangements, without unduly delaying the reflection of these downgrades in their overall risk management practices;

                                          (b)

                                          adopt a comprehensive approach to limiting procyclical features pursuant to the regulatory requirements on procyclicality in Article 41 of Regulation (EU) No 648/2012, in particular in the event of downgrades of credit ratings;

                              (ii)

                              CCPs inform, without prejudice to Article 49 of Regulation (EU) No 648/2012, their competent authorities, and competent authorities inform members of the college established under Article 18 of Regulation (EU) No 648/2012, when they:

                                          (a)

                                          reduce the scope of eligible collateral;

                                          (b)

                                          materially modify collateral haircuts;

                                          (c)

                                          materially decrease the concentration limits applied in accordance with Article 42 of Commission Delegated Regulation (EU) No 153/2013.

                        To the extent that it does not interfere with the timely implementation of risk management decisions, this information should be provided sufficiently in advance of implementation.

                  3.

                  It is recommended that, to the extent permitted by law, the clearing members’ relevant competent authorities engage with the clearing members within the context of ongoing supervision to ensure that the application by the clearing members of their risk-management procedures when providing clearing services to their clients does not result in sudden and significant changes and cliff effects in margin calls and the collection of margins – unless these sudden and significant changes and cliff effects are an inevitable result of market events – and does not result in collateral practices in the event of downgrades of credit ratings, and does not materially curtail the soundness of the risk management practices adopted by the clearing members or affect their resilience.

                  4.

                  It is recommended that, to the extent permitted by law, the relevant competent authorities of financial counterparties and non-financial counterparties that enter into non centrally cleared OTC derivative contracts and securities financing transactions seek to ensure that their risk management procedures do not result, in the event of downgrades of credit ratings, in sudden and significant changes and cliff effects in margin calls and collection and in collateral practices. This could be achieved, for example, by encouraging counterparties to:

                              (i)

                              use a progressive and granular sequence when implementing downgrades of credit ratings, in their overall risk management practices;

                              (ii)

                              maintain a comprehensive approach to limiting procyclical features in accordance with the regulatory requirements in Article 11 of Regulation (EU) No 648/2012, especially with respect to ratings downgrades.

         Recommendation B – Stress scenario for the assessment of future liquidity needs

                  1.

                  It is recommended that the European Securities and Markets Authority (ESMA) review the draft technical standards (6) developed under Article 44(2) of Regulation (EU) No 648/2012, and in particular Article 32(4) of those draft technical standards, to include provisions that require CCPs to include in their stress scenarios under Article 44 of Regulation (EU) No 648/2012 the default of any two entities that provide services to the CCP and whose default could materially affect the liquidity position of the CCP.

                  2.

                  Until any action taken by ESMA to comply with Recommendation B(1) and the possible introduction of corresponding Union legislation, it is recommended that competent authorities, to the extent permitted by law, seek to ensure that the stress scenarios under Article 44 of Regulation (EU) No 648/2012 include the default of any two entities that provide services to the CCP and whose default could materially affect the liquidity position of the CCP; such entities could include the liquidity service providers, settlement service providers or any other service providers whose default could possibly affect the liquidity position of the CCP.

                  3.

                  It is recommended that competent authorities, to the extent permitted by law, seek to ensure that CCPs’ remedial actions to address any shortfall in resources available to cover liquidity needs that is identified by applying the additional stress scenarios referred to in Recommendation B(2) or Recommendation B(1), once corresponding Union legislation is in force, do not, when applied in times of market stress, place an additional burden on the clearing members. To this end, the competent authorities should ensure that CCPs seek additional liquidity from alternative market sources.

                  4.

                  It is recommended that, to the extent permitted by law, ESMA, in cooperation with the competent authorities, engage with CCPs – and to the extent possible with relevant authorities in third countries – to conduct coordinated liquidity stress test exercises which also take into account the default of any two entities as referred to in Recommendations B(1) and B(2).

         Recommendation C – Limiting liquidity constraints related to margin collection

                  1.

                  It is recommended that the competent authorities seek to ensure, to the extent permitted by law and consistent with CCPs’ adequate risk management practices and financial resilience, that when CCPs issue margin calls and collect margins to limit their credit exposures, they aim to avoid creating unnecessary liquidity constraints for clearing members, including by ensuring that:

                              (i)

                              with respect to margins called and collected on an intraday basis, and to the extent operationally and legally possible, CCPs identify separately:

                                          (a)

                                          the margin covering potential exposures, including exposures resulting from positions entered into and novated on that day;

                                          (b)

                                          the margin covering realised exposures resulting from market movements on that day, which CCPs should consider collecting and paying out on the same day;

                              (ii)

                              when initial margin collateral has been provided by a clearing member in excess of the collateral required to cover the risk stemming from the positions registered in an account, including positions novated intraday and any increased exposure incurred intraday, CCPs prioritise, where operationally possible, the use of excess collateral over collecting additional collateral, unless the clearing member voluntarily posts the add-on margin. This process should be carried out in a predictable, transparent and scheduled manner;

                              (iii)

                              CCPs ensure that the process for collecting of initial and variation margins does not result in excessive operational constraints for the clearing member which may pose additional liquidity risk.

                  2.

                  It is recommended that the clearing members’ relevant competent authorities monitor and, where necessary and permitted by law and consistent with adequate risk management practices and financial resilience, engage with the clearing members within the context of ongoing supervision so that when clearing members issue margin calls and collect initial and variation margins from their clients, including financial and non-financial counterparties, in order to limit their credit exposures, they aim to avoid unnecessary liquidity constraints for their clients. This could be achieved, for example, by ensuring that:

                              (i)

                              when sufficient initial margin has been provided by a client to cover the risk stemming from the positions registered with the clearing member, including positions novated intraday and any increased exposure incurred intraday, clearing members prioritise the use of excess initial margin collateral over collecting additional collateral unless the client voluntarily posts the add-on margin;

                              (ii)

                              clearing members ensure that the process for the collection of initial and variation margins does not result in excessive operational constraints for the clients which may pose additional liquidity risk.

         Recommendation D – Mitigation of procyclicality in the provision of client clearing services and in securities financing transactions

                  1.

                  It is recommended that relevant competent authorities contribute to steer discussions at international level, through their participation in international fora and standard-setting bodies, where applicable, on means to mitigate the procyclicality in margin and haircut practices in the provision of client services related to exchange traded and over-the-counter derivatives as well as securities financing transactions, whether centrally cleared or not centrally cleared. These discussions should aim at developing global standards governing minimum requirements for the mitigation of procyclicality when providing these services.

                  2.

                  If, such global standards are set, it is recommended that the European Commission considers proposing that Union legislation give them effect.

            SECTION 2

         IMPLEMENTATION

      1.   Definitions

                  1.

                  For the purposes of this Recommendation the following definitions apply:

                              (a)

                              ‘competent authority’ means an authority designated by a Member State in accordance with Article 22 of Regulation (EU) No 648/2012;

                              (b)

                              ‘CCP’ has the same meaning as in Article 2(1) of Regulation (EU) No 648/2012;

                              (c)

                              ‘clearing’ has the same meaning as in Article 2(3) of Regulation (EU) No 648/2012;

                              (d)

                              ‘clearing member’ has the same meaning as in Article 2(14) of Regulation (EU) No 648/2012;

                              (e)

                              ‘derivative’ or ‘derivative contract’ has the same meaning as in Article 2(5) of Regulation (EU) No 648/2012;

                              (f)

                              ‘relevant competent authority’ means the competent authority referred to in the legislation referred to in Article 2(8) of Regulation (EU) No 648/2012 and the competent authority designated by a Member State pursuant to and for the purposes of Article 10(5) of Regulation (EU) No 648/2012;

                              (g)

                              ‘financial counterparty’ has the same meaning as in Article 2(8) of Regulation (EU) No 648/2012;

                              (h)

                              ‘non-financial counterparty’ has the same meaning as in Article 2(9) of Regulation (EU) No 648/2012;

                              (i)

                              ‘client’ has the same meaning as in Article 2(15) of Regulation (EU) No 648/2012.

            2.   Criterion for implementation

      In implementing this Recommendation, due regard should be paid to the principle of proportionality, taking into account the objective and the content of each recommendation.
      3.   Timeline for the follow-up

      In accordance with Article 17(1) of Regulation (EU) No 1092/2010 addressees must communicate to the European Parliament, the Council, the Commission and to the ESRB the actions undertaken in response to this recommendation or substantiate any inaction. Communications should be sent in compliance with the following timelines.
      1.   Recommendation A

                  (a)

                  By 30 November 2020, the competent authorities are requested to submit to the European Parliament, the Council, the Commission and to the ESRB the form in Annex I on the implementation of Recommendations A(1) and A(2).

                  (b)

                  By 30 November 2020, the relevant competent authorities are requested to deliver to the European Parliament, the Council, the Commission and to the ESRB the form in Annex I on the implementation of Recommendations A(3) and A (4).

            2.   Recommendation B

                  (a)

                  By 31 December 2021, ESMA is requested to deliver to the European Parliament, the Council, the Commission and to the ESRB the form in Annex I on the implementation of Recommendation B(1).

                  (b)

                  By 30 November 2020, the competent authorities are requested to deliver to the European Parliament, the Council, the Commission and to the ESRB the form in Annex I on the implementation of Recommendations B(2), B(3) and B(4).

            3.   Recommendation C

                  (a)

                  By 30 November 2020, the competent authorities are requested to deliver to the European Parliament, the Council, the Commission and to the ESRB the form in Annex I on the implementation of Recommendation C(1).

                  (b)

                  By 30 November 2020, the relevant competent authorities of clearing members are requested to deliver to the European Parliament, the Council, the Commission and to the ESRB the form in Annex I on the implementation of Recommendation C(2).

            4.   Recommendation D

                  (a)

                  By 31 December 2021, the competent authorities and the relevant competent authorities are requested to deliver to the European Parliament, the Council, the Commission and the ESRB, the form in Annex I on the implementation of Recommendation D(1).

                  (b)

                  By 31 December 2022 the Commission is requested to deliver to the European Parliament, the Council and the ESRB, the form in Annex I on the implementation of Recommendation D(2).

            4.   Monitoring and assessment

                  1.

                  The General Board will assess the actions and justifications communicated by the addressees and, where appropriate, may decide that this Recommendation has not been followed and that an addressee has failed to provide adequate justification for its inaction.

                  2.

                  The methodology set out in the Handbook on the assessment of compliance with ESRB recommendations (7), which describes the procedure for assessing compliance with ESRB recommendations, shall not apply.

         Done at Frankfurt am Main, 25 May 2020.

               Head of the ESRB Secretariat,

               on behalf of the General Board of the ESRB

            Francesco MAZZAFERRO

         (1)  OJ L 331, 15.12.2010, p. 1

         (2)  OJ C 58, 24.2.2011, p. 4.

         (3)  Regulation (EU) No 648/2012 of the European Parliament and of the Council of 4 July 2012 on OTC derivatives, central counterparties and trade repositories (OJ L 201, 27.7.2012, p. 1).

         (4)  Commission Delegated Regulation (EU) No 153/2013 of 19 December 2012 supplementing Regulation (EU) No 648/2012 of the European Parliament and of the Council with regard to regulatory technical standards on requirements for central counterparties (OJ L 52, 23.2.2013, p. 41).

         (5)  Regulation (EU) 2019/834 of the European Parliament and of the Council of 20 May 2019 amending Regulation (EU) No 648/2012 as regards the clearing obligation, the suspension of the clearing obligation, the reporting requirements, the risk-mitigation techniques for OTC derivative contracts not cleared by a central counterparty, the registration and supervision of trade repositories and the requirements for trade repositories (OJ L 141, 28.5.2019, p. 42).

         (6)  Draft technical standards under Regulation (EU) No 648/2012 of the European Parliament and of the Council of 4 July 2012 on OTC Derivatives, CCPs and Trade Repositories (ESMA/2012/600).

         (7)  Handbook on the assessment of compliance with ESRB recommendations, April 2016, available at https://www.esrb.europa.eu/pub/pdf/recommendations/160502_handbook.en.pdf

         ANNEX I
         Communication of the actions undertaken in response to the recommendation
         1.   Details of addressee

                     Recommendation

                     Country of the Addressee

                     Institution

                     Name and contact details of the respondent

                     Date of communication

               2.   Communication of actions

                        Recommendation

                     Do you comply? (yes/no/not applicable)

                     Description of actions taken to ensure compliance

                     Justification for partial compliance or non-compliance

                     Recommendation A(1)

                     Recommendation A(2)

                     Recommendation A(3)

                     Recommendation A(4)

                     Recommendation B(1)

                     Recommendation B(2)

                     Recommendation B(3)

                     Recommendation B(4)

                     Recommendation C(1)

                     Recommendation C(2)

                     Recommendation D(1)

                     Recommendation D(2)

               3.   Notes

                     1.

                     This form is used for the communication required by Article 17(1) of Regulation (EU) No 1092/2010.

                     2.

                     Each addressee should submit the completed form to the ESRB via the ESRB Secretariat electronically via DARWIN in the dedicated folder or by email to notifications@esrb.europa.eu. The ESRB Secretariat will arrange for the transmission of the communications to the European Parliament, the Council and the Commission, on an aggregated basis.

                     3.

                     If a recommendation does not apply, please select ‘non-applicable’ in the box ‘Do you comply?’.

                     4.

                     Addressees are expected to provide all relevant information and documentation related to the implementation of the recommendations, including information on the substance and timing of the actions taken.

                     5.

                     If an addressee only partially complies, it should provide a full explanation of the extent of non-compliance, as well as other details of partial compliance. The explanation should specify clearly the relevant parts of the recommendation which the addressees do not comply with.