The European Banking Authority (EBA), the
European Insurance and Occupational Pensions Authority (EIOPA) and the European
Securities and Markets Authority (ESMA), the European Supervisory Authorities
(ESAs), have today published a final report with draft regulatory technical standards (RTS)
proposing to amend the Commission Delegated Regulation on the risk mitigation techniques for OTC derivatives not cleared by a
CCP (bilateral margin requirements) under the European Market Infrastructure Regulation (EMIR).
ESMA has also published a final reportwith new draft
RTS proposing to amend the three Commission Delegated Regulations[1] on the clearing obligation under EMIR.
Intragroup transactions
The amendments included in these draft RTS propose
to extend the temporary exemption for 18 months for intragroup transactions.
The bilateral margin Delegated Regulation and the
clearing obligation Delegated Regulations originally introduced temporary
exemptions for intragroup transactions with third-country group entities to
facilitate centralised risk management-procedures for groups, while the
relevant equivalence decisions are being assessed.
Equity options
The amendments included in the draft RTS on
bilateral margin propose to extend the temporary exemption for single-stock
equity options or index options (equity options) for three years.
The bilateral margin Delegated Regulation
originally introduced a temporary exemption for equity options so as to facilitate
international regulatory convergence with regard to risk-management procedures.
The new draft RTS for intragroup transactions and
equity options are proposing to extend the abovementioned temporary exemptions
to avoid undue costs and an unlevel playing field situation for EU
counterparties.
Novations from UK counterparties to EU
counterparties
In the context of the withdrawal of the UK from
the EU, the ESAs and other EU authorities and institutions have highlighted the
importance for market participants to be prepared for the end of the transition
period. These draft RTS reintroduce a regulatory solution to support these
preparations.
The draft RTS allow UK counterparties to be
replaced with EU counterparties without triggering the bilateral margin and
clearing obligation requirements under certain conditions. This limited
exemption would ensure a level playing field between EU counterparties and the preservation
of the regulatory and economic conditions under which the contracts were
originally entered into. Counterparties should start negotiating as soon as
possible the novation of their transactions which are in the scope of these
amending regulations, given the twelve month timeframe to benefit from this
measure.
Next steps
The ESAs have developed the draft RTS on bilateral
margining under Article 11(15) of EMIR, while ESMA has developed the draft RTS
on the clearing obligation under Article 5(2) of EMIR.
The ESAs have now submitted this new version of the
draft RTS on bilateral margin to the Commission for endorsement in the form of
a Commission Delegated Regulation, i.e. a legally binding instrument applicable
in all Member States of the European Union. It replaces the version submitted
and published on 4 May 2020. ESMA has also submitted to the Commission at the
same time the draft RTS on the clearing obligation, also for endorsement in the
form of a Commission Delegated Regulation. Following their endorsement, they
are then subject to non-objection by the European Parliament and the Council.
[1]
Commission Delegated Regulations (EU) 2015/2205, (EU) 2016/592 and (EU)
2016/1178
