Featured Product

    ESAs Publish Draft Amendments to Bilateral Margin Requirements

    December 05, 2019

    ESAs published joint draft regulatory technical standards to amend the Delegated Regulation on the risk mitigation techniques for non-cleared over-the-counter (OTC) derivatives (bilateral margining) as well as a joint statement on the introduction of fallbacks in OTC derivative contracts and the requirement to exchange collateral. The regulatory technical standards and the statement were developed to facilitate further international consistency in the implementation of the global framework agreed by BCBS and IOSCO. ESAs have developed these regulatory standards under Article 11(15) of European Market Infrastructure Regulation or EMIR (EU No 648/2012).

    In view of the clarifications and changes of the global framework made over the past months by BCBS and IOSCO, the report and related regulatory standards clarify the expectations in relation to the threshold above which initial margin is expected to be exchanged and introduce a further phase-in of one year for smaller counterparties in scope for the initial margin requirements. Taking into account the global progress toward implementation of the international framework as well as the risks that BCBS and IOSCO framework was developed to address, a few amendments have been included in relation to the treatment of physically settled foreign-exchange forward and swap contracts, intragroup contracts, and equity option contracts. 

    The statement by ESAs clarifies the view of ESAs that amendments made to outstanding uncleared OTC derivative contracts for the sole purpose of introducing such fallbacks should not create new obligations on these legacy contracts. With regard to the statement in relation to fallbacks, ESAs believe it useful to ensure legal certainty on this issue, in case or to the extent this is not already provided in some jurisdictions. ESAs are mindful of the efforts that counterparties continue to undertake to introduce fallbacks in their legacy OTC derivative contracts across all asset classes. Therefore, while further legal certainty is expected on this via a legislative change, ESAs do not expect competent authorities to

    • Prioritize their supervisory actions toward margining requirements arising as a result of the introduction of fallbacks in legacy uncleared OTC derivative contracts
    • Generally apply their risk-based supervisory powers in their day-to-day enforcement of applicable legislation in this area in a proportionate manner

    ESAs are submitting the draft technical standards, presented in the Annex to final report, to EC for endorsement in the form of a Commission Delegated Regulation. Following the endorsement, they will then be subject to non-objection by the European Parliament and the Council. Post that, the Regulation shall enter into force on the day following that of its publication in the Official Journal of the European Union.

     

    Related Links 

    Keywords: Europe, EU, Banking, Securities, Insurance, Bilateral Margin Requirements, Regulatory Technical Standards, OTC Derivatives, Fallback, EMIR, ESAs, BCBS, IOSCO

    Related Articles
    News

    IAIS on Package for 2020 Data Collection on ICS and Aggregation Method

    IAIS published technical specifications, questionnaires, and templates for 2020 Insurance Capital Standard (ICS) and Aggregation Method data collections.

    June 30, 2020 WebPage Regulatory News
    News

    BIS to Establish More Innovation Hubs in Europe and North America

    BIS announced that it will establish new Innovation Hub centers across Europe and in North America in cooperation with member central banks.

    June 30, 2020 WebPage Regulatory News
    News

    FED Updates Form FR 2052a for LCR Reporting by Banks

    FED updated the reporting form for FR 2052a, which is used to monitor the overall liquidity profile of certain supervised institutions.

    June 30, 2020 WebPage Regulatory News
    News

    PRA Statement on Changes to CRR in Response to COVID-19 Crisis

    PRA published a statement that sets out its views on certain amendments made to Capital Requirements Regulations (CRR and CRR2) via EU Regulation 2020/873 (CRR "Quick Fix"), including some guidance for firms.

    June 30, 2020 WebPage Regulatory News
    News

    CFRF Publishes Guide for Addressing Climate-Related Financial Risks

    The Climate Financial Risk Forum (CFRF), which is a joint climate risk forum of FCA and PRA, published a guide written by the industry for the industry to help firms approach and address climate-related financial risks.

    June 29, 2020 WebPage Regulatory News
    News

    IAIS Paper Provides Guidance on Liquidity Risk Management for Insurers

    IAIS published an application paper on liquidity risk management for insurers.

    June 29, 2020 WebPage Regulatory News
    News

    EBA Responds to EC Consultation on Digital Finance Strategy for Europe

    EBA published its response to the EC consultation on a new Digital Finance Strategy for Europe.

    June 29, 2020 WebPage Regulatory News
    News

    EIOPA Responds to EC Consultation on Digital Finance Strategy

    EIOPA responded to the EC consultation on a new digital finance strategy for Europe.

    June 29, 2020 WebPage Regulatory News
    News

    ESMA Responds to EC Consultation on Digital Finance Strategy

    ESMA published its response to the EC consultation on the new digital finance strategy for EU.

    June 29, 2020 WebPage Regulatory News
    News

    FSB Report Identifies Gaps in Too-Big-To-Fail Reforms

    FSB published, for consultation, a report on evaluation of the too-big-to-fail (TBTF) reforms for systemically important banks.

    June 28, 2020 WebPage Regulatory News
    RESULTS 1 - 10 OF 5404