Commencement of 3-month period when CCPs cease to meet certain conditions

Should the 3-month period available under Regulation (EU) No 575/2013 (CRR) Article 311, where a firm may continue to treat a CCP as QCCP following confirmation that the CCP no longer meets the conditions for authorisation or recognition, apply: (1) From the earlier of the date of ESMA negative confirmation of authorisation or recognition or from the end of the transitional period available for CCPs under CRR Articles 497(1) and 497(2); or (2) Only after ESMA has made an initial positive assessment of authorisation or recognition and the CCP fails to meet those conditions at a later date?

Under Article 497(1) of CRR, firms may apply transitional provisions to a CCP whereby it is treated as a QCCP until 15 June 2014, or sooner if ESMA confirms beforehand. CRR Article 497(2) allows the same for third country CCPs. There is a possible extension to 15 December 2014 under CRR Article 497(3), if the EC adopts an implementing act to extend the transitional period by a further 6 months. Once ESMA confirms that a CCP does not meet authorisation or recognition criteria under EMIR Articles 14 (authorisation) and 25 (recognition), that CCP is considered to be NQCCP. CRR Article 311 provides for a 3-month period before the end of which a firm must cease capitalising its exposures to that CCP using QCCP treatment in accordance with CRR Article 301(2); and instead apply the NQCCP treatments set out in CRR Article 306(1), 309 and in accordance with the Standardised Approach for credit risk as set out in Chapter 2. It is unclear whether the 3-month period available under CRR Article 311 applies: (1) From the earlier of the date of ESMA negative confirmation of authorisation or recognition, or from the end of the transitional period; or (2) Only where ESMA has made an initial positive assessment of authorisation or recognition and the CCP fails to meet those conditions at a later date. Example 1 • "ABC CCP" is a third country CCP and has submitted an application to ESMA for recognition under EMIR Article 25. • Assume the EC extends the transitional period under CRR Article 497(3) by a further 6 months. • Assume ESMA confirms on 15 December 2014 that ABC CCP does not satisfy recognition criteria. • On that basis should firms treat ABC CCP as NQCCP from 15 December 2014, or should ABC CCP be treated as QCCP for 3 months until 15 March 2015? Example 2 • As above, however ESMA confirms earlier on 01 October 2014 that ABC CCP does not satisfy recognition criteria. • Should firms treat ABC CCP as NQCCP from 01 October 2014, or can ABC CCP be treated as QCCP for 3 months until 01 January 2015? Example 3 • As above, however ESMA does not confirm that ABC CCP satisfies recognition criteria by 15 December 2014, the last date of the transitional period under CRR Article 497(2). • Should firms treat ABC CCP as NQCCP from 15 December 2014, or can ABC CCP be treated as QCCP for 3 months until 15 March 2015?