EC published Regulation 2021/236, which amends the technical standards laid down in Regulation 2016/2251, with respect to the timing for application of certain risk management procedures for the exchange of collateral. The amended regulation addresses the one-year extension of the deadline for implementation of initial margin requirements for certain counterparties. Regulation 2021/236shall enter into force on the day following that of its publication in the Official Journal of the European Union.
Regulation 2016/2251, which is being amended, provides for a phase-in of the initial margin requirements over a number of years based on the implementation schedule agreed by BCBS and IOSCO. BCBS and IOSCO recently amended their schedule for the implementation of requirements for the exchange of collateral. This amendment to the implementation schedule of BCBS and IOSCO should be reflected in the phase-in provided for in Regulation 2016/2251. In the interest of supporting a smooth and orderly implementation of margin requirements across members of BCBS and IOSCO and to avoid market fragmentation, the deadline for the implementation of the initial margin requirements has been extended by one year for counterparties with an aggregate average notional amount of non-centrally cleared derivatives between EUR 8 billion and EUR 50 billion. As part of the phase-in, counterparties with an aggregate average notional amount of non-centrally cleared derivatives above EUR 50 billion shall be subject to the initial margin requirements from September 01, 2021. Additionally, counterparties with an aggregate average notional amount of non-centrally cleared derivatives above EUR 8 billion shall be subject to the initial margin requirements from September 01, 2022.
Regulation 2016/2251 provides for a deferred date of application of the bilateral margin requirements for non-centrally cleared over-the-counter (OTC) derivative contracts concluded between counterparties that are part of the same group and where one counterparty is established in a third country and the other counterparty is established in EU. UK became a third country on February 01, 2020. Counterparties cannot predict what the status of a counterparty established in UK might become or to what extent that counterparty would be able to continue providing certain services to the counterparties established in EU. To ensure a smooth functioning of the market and a level playing field between counterparties established in EU, counterparties should be able to replace counterparties established in UK with counterparties in a member state without being required to exchange collateral in respect of those novated contracts. In addition, counterparties should be given sufficient time to replace their counterparties established in UK. Thus, the date from which the requirement to exchange collateral may be triggered for the novation of those contracts has been deferred, as part of these amendments to Regulation 2016/2251.
Effective Date: February 18, 2021
Keywords: Europe, EU, Banking, Securities, Implementation Schedule, Initial Margin, OTC Derivatives, Regulation 2016/2251, Counterparty Risk, Market Risk, Basel, Regulation 2021/236, BCBS, IOSCO, EC
The Central Bank of the Philippines (BSP) issued communications covering developments related to online lending platforms, open finance framework and roadmap, and on the expected regulations in the area sustainable finance.
The Board of Governors of the Federal Reserve System (FED) published the final rule that amends Regulation I to reduce the quarterly reporting burden for member banks by automating the application process for adjusting their subscriptions to the Federal Reserve Bank capital stock, except in the context of mergers.
The European Banking Authority (EBA) published its assessment of risks through the quarterly Risk Dashboard and the results of the Autumn edition of the Risk Assessment Questionnaire (RAQ).
The Malta Financial Services Authority (MFSA) updated the guidelines on supervisory reporting requirements under the reporting framework 3.0.
The Hong Kong Monetary Authority (HKMA) published a circular, along with the reporting form and instructions, for self-assessment, by authorized institutions, of compliance with the Code of Banking Practice 2021.
The Financial Conduct Authority (FCA) decided to register European DataWarehouse Ltd and SecRep Limited as securitization repositories under the UK Securitization Regulation, with effect from January 17, 2022.
The European Commission (EC) published the Delegated Regulation 2022/25, which supplements the Investment Firms Regulation (IFR or Regulation 2019/2033) with respect to the regulatory technical standards specifying the methods for measuring the K-factors referred to in Article 15 of the IFR.
The Bank of International Settlements (BIS) published a paper that assesses the ways in which platform-based business models can affect financial inclusion, competition, financial stability and consumer protection.
The Central Bank of Egypt (CBE) published a circular with instructions on emergency liquidity assistance to banks that are unable to meet their liquidity requirements.
The European Supervisory Authorities (ESAs) published the list of identified financial conglomerates for 2021.