May 04, 2018

ESAs launched two joint consultations to amend regulatory technical standards on the clearing obligation and risk mitigation techniques for uncleared OTC derivatives. The standards aim to amend the current European Market Infrastructure Regulation (EMIR) on the clearing obligation and risk-mitigation techniques on OTC derivatives not cleared by central counterparties (CCPs), to provide a specific treatment for simple, transparent, and standardized (STS) securitization. Comments to these consultations can be sent to EBA and ESMA until June 15, 2018.

The securitization regulation and the amended EMIR provide a specific treatment for STS securitizations in relation to the clearing obligation and on risk-mitigation techniques on non-cleared OTC derivatives frameworks. The consultation on the draft regulatory technical standards on the clearing obligation clarifies which arrangements under covered bonds or securitizations adequately mitigate counterparty risk and, thus, may benefit from an exemption from the clearing obligation. The consultation on the draft regulatory technical standards on risk-mitigation techniques aims to extend the type of special treatment currently associated with covered bonds to STS securitizations. The proposed treatment—that is, no exchange of initial margins and collection only of variation margins—is applicable only where the STS securitization structure meets a specific set of conditions equivalent to the ones required for covered bonds issuers to be able to benefit of that same treatment. ESAs have developed these two consultation papers in accordance with Articles 4 and 11 of EMIR, as amended under Article 42 of the Securitization Regulation. 

 

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Comment Due Date: June 15, 2018

Keywords: Europe, EU, Banking, Insurance, Securities, Regulatory Technical Standards, EMIR, Securitization Regulation, STS Securitization, ESAs

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