General Information & Client Service
  • Americas: +1.212.553.1653
  • Asia: +852.3551.3077
  • China: +86.10.6319.6580
  • EMEA: +44.20.7772.5454
  • Japan: +81.3.5408.4100
Media Relations
  • New York: +1.212.553.0376
  • London: +44.20.7772.5456
  • Hong Kong: +852.3758.1350
  • Tokyo: +813.5408.4110
  • Sydney: +61.2.9270.8141
  • Mexico City: +001.888.779.5833
  • Buenos Aires: +0800.666.3506
  • São Paulo: +0800.891.2518
November 29, 2018

ESAs published the final report containing the proposed regulatory technical standards to amend the Delegated Regulation (EU) 2016/2251 on risk mitigation techniques for over-the-counter (OTC) derivatives not cleared by a central counterparty, or CCP, (bilateral margin requirements) under the European Market Infrastructure Regulation (EMIR). The Regulation shall enter into force on the day following that of its publication in the Official Journal of the European Union.

The regulatory standards propose, in the context of Brexit, to introduce a limited exemption to facilitate the novation of certain OTC derivative contracts to EU counterparties during a specific time-window. The amendments would only apply if UK leaves EU without the conclusion of a withdrawal agreement. In the context of the ongoing withdrawal negotiations between EU and UK and to address the situation where a UK counterparty may no longer be able to provide certain services across EU, counterparties in EU may want to novate their OTC derivative contracts by replacing the UK counterparty with an EU counterparty. However, by doing this, they may trigger the clearing obligation or the bilateral margin requirements for these contracts, thus facing costs that were not accounted for when originally entering into the contract. The draft regulatory technical standards allow UK counterparties to be replaced with the EU ones, without triggering the new procedures defined in the bilateral margin regulatory standards.

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 where originally entered into. The scope, time. and intent pf this exemption are aligned with the draft regulatory standards on clearing obligation, which ESMA published on November 08, 2018. The window for the novation of OTC derivative contracts that fall under the scope of this amending regulation and the one published by ESMA would be open for twelve months, following the withdrawal of UK from EU. Counterparties can, however, start repapering their contracts ahead of the application date, making the novation conditional upon a no-deal Brexit, given the conditional application date of these two amending regulations.

ESAs and other EU authorities and institutions have been clear on the importance for market participants to be prepared for Brexit, including the possibility of a no-deal scenario. These draft regulatory technical standards provide regulatory solutions to support Brexit preparations of counterparties and to maintain a level playing field between EU counterparties, while addressing potential risks to orderly markets and financial stability. This final report is sent to EC to submit the draft technical standards for endorsement in the form of a Commission Delegated Regulation, that is, a legally binding instrument applicable in all EU member states. Following the endorsement, they will be then subject to the review of the European Parliament and of the Council.

 

Related Links

Keywords: Europe, EU, UK, Banking, Securities, Insurance, EMIR, Bilateral Margin Requirements, OTC Derivatives, Brexit, Novated Contracts, ESAs 

Related Articles
News

APRA Grants License to New Authorized Deposit-Taking Institution

APRA announced that it has granted Judo Bank Pty Ltd a license to operate as an authorized deposit-taking institution without restrictions, under the Banking Act 1959.

April 24, 2019 WebPage Regulatory News
News

BoE Report on Evaluation of Approach to Concurrent Stress Testing

BoE published a report on the evaluation, by the Independent Evaluation Office (IEO), of the effectiveness of the approach of BoE to concurrent stress testing.

April 24, 2019 WebPage Regulatory News
News

FDIC Consults on Approach to Resolution Planning for IDIs

FDIC approved an Advance Notice of Proposed Rulemaking (ANPR) and is seeking comment on ways to tailor and improve its rule requiring certain insured depository institutions (IDIs) to submit resolution plans.

April 22, 2019 WebPage Regulatory News
News

FDIC Specifies Submission Timeline for FFIEC 031, 041, and 051 Reports

FDIC published the financial institution letters (FIL-21-2019 and FIL-22-2019) that offer guidance on submission of Call Reports FFIEC 051, FFIEC 041, and FFIEC 031 for the first quarter of 2019.

April 19, 2019 WebPage Regulatory News
News

US Agencies Propose to Revise Call Reports FFIEC 031, 041, and 051

US Agencies (FDIC, FED, and OCC) proposed to revise and extend, for three years, the Call Reports FFIEC 031, FFIEC 041, and FFIEC 051.

April 19, 2019 WebPage Regulatory News
News

US Agencies Propose to Amend Rule on Supplementary Leverage Ratio

US Agencies (FDIC, FED, and OCC) are proposing to revise the capital requirements for supplementary leverage ratio, as required by the Economic Growth, Regulatory Relief, and Consumer Protection (EGRRCP) Act.

April 18, 2019 WebPage Regulatory News
News

EIOPA Held InsurTech Roundtable on Use of Cloud Computing by Insurers

EIOPA had, on April 11, 2019, hosted its Fourth InsurTech Roundtable on the use of cloud computing by insurance undertakings.

April 17, 2019 WebPage Regulatory News
News

EP Resolution on Proposal for Sovereign Bond Backed Securities

The European Parliament (EP) published adopted text on the proposal for a regulation of the European Parliament and of the Council on sovereign bond-backed securities (SBBS).

April 16, 2019 WebPage Regulatory News
News

HKMA Decides to Maintain Countercyclical Capital Buffer at 2.5%

HKMA announced that, in accordance with the Banking (Capital) Rules, the countercyclical capital buffer (CCyB) ratio for Hong Kong remains at 2.5%.

April 16, 2019 WebPage Regulatory News
News

EP Approves Agreement on Package of CRD 5, CRR 2, BRRD 2, and SRMR 2

The European Parliament (EP) approved the final agreement on a package of reforms proposed by EC to strengthen the resilience and resolvability of European banks.

April 16, 2019 WebPage Regulatory News
RESULTS 1 - 10 OF 2954