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    EBA Revises Validation Rules; ESAs to Amend Bilateral Margin Standards

    June 13, 2022

    The European Banking Authority (EBA) revised the list of validation rules for its reporting framework. The revised list highlights rules that have been deactivated either for incorrectness or for triggering information technology problems. Additionally, the European Supervisory Authorities (ESAs) published a report that sets out the draft regulatory technical standards proposing to amend the Commission Delegated Regulation (2016/2251) on the risk mitigation techniques for over-the-counter (OTC) derivatives not cleared by a central counterparty or CCP (bilateral margin requirements). The European Securities and Markets Authority (ESMA) also published a final report containing the draft regulatory technical standards proposing to amend the three Commission Delegated Regulations (2015/2205, 2016/592, and 2016/1178) on clearing obligation under the European Market Infrastructure Regulation (EMIR).

    The amendments included in these draft regulatory technical standards proposed to extend the current temporary exemptions regime for intragroup contracts by three years. The extension of temporary exemptions will accommodate the ongoing assessment of third-country equivalence and allow for a review of the intragroup exemptions framework under the EMIR review. The bilateral margin Delegated Regulation and the clearing obligation Delegated Regulations originally introduced temporary exemptions for intragroup contracts with third-country group entities, to facilitate centralized risk management-procedures for groups. The proposed amendments relate to the temporary regime for intragroup OTC derivative contracts where one counterparty is established in a third country and the other counterparty is established in the European Union. ESAs are of the view that a review of the EMIR framework for intragroup exemptions for contracts with third countries, as well as its interaction with the Capital Requirements Regulation (CRR), would be desirable and the scheduled upcoming review of EMIR offers the opportunity to address aforementioned challenges. The current temporary regime expires on June 30, 2022; to avoid any negative consequences, the draft regulatory technical standards proposed to extend the temporary regime by three years.

    ESAs have developed the draft regulatory technical standards on bilateral margining under Article 11(15) of EMIR, while ESMA has developed the draft regulatory technical standards on the clearing obligation under Article 5(2) of EMIR. ESAs have now submitted these draft standards to the European Commission for endorsement. Following their endorsement, the standards will then be subject to non-objection by the European Parliament and the Council.

     

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    Keywords: Europe, EU, Banking, Validation Rules, Reporting, Basel, Insurance, Securities, Regulatory Technical Standards, Clearing Obligation, EMIR, Derivatives, Bilateral Margin Requirements, CRR, EBA, ESMA, ESAs

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