Featured Product

    ESAs Propose to Amend Bilateral Margin Requirements Under EMIR

    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

    SEC Finalizes Capital and Margin Requirements for Security-Based Swaps

    SEC adopted a package of rules and rule amendments to establish capital, margin, and segregation requirements for security-based swaps, under Title VII of the Dodd-Frank Act.

    August 22, 2019 WebPage Regulatory News
    News

    ECB Revises Prudential Provisioning Expectations for New NPEs

    ECB is revising its supervisory expectations for prudential provisioning of new non-performing exposures (NPEs) specified in the “Addendum to the ECB Guidance to banks on non-performing loans” (Addendum)

    August 22, 2019 WebPage Regulatory News
    News

    CFTC Proposes to Revise Information Collection on Margin Requirements

    CFTC is requesting comments on the burdens associated with certain aspects of the Margin Requirements for Uncleared Swaps for Swap Dealers and Major Swap Participants (final rule).

    August 21, 2019 WebPage Regulatory News
    News

    FASB to Delay Effective Date for Insurance Contracts Standard

    FASB issued a proposed Accounting Standards Update that would grant all insurance companies that issue long-duration contracts, such as life insurance and annuities, additional time to apply the standard that addresses this area of financial reporting.

    August 21, 2019 WebPage Regulatory News
    News

    EBA Publishes Phase 2 of Technical Package on Reporting Framework 2.9

    EBA published phase 2 of its technical package on the reporting framework 2.9, which includes validation rules, Data Point Model (DPM) data dictionary, and XBRL taxonomies.

    August 21, 2019 WebPage Regulatory News
    News

    FSB Publishes Responses to Its Consultation Related to SME Financing

    FSB published responses received to the consultation on a report on the evaluation of the effects of financial regulatory reforms on small and medium-sized enterprise (SME) financing.

    August 21, 2019 WebPage Regulatory News
    News

    APRA Revises Related Entities Standard for Banks

    APRA published a strengthened prudential standard APS 222 on associations with related entities, with the aim to mitigate contagion risk within banking groups.

    August 20, 2019 WebPage Regulatory News
    News

    EBA and ESMA Issue Joint Response to EC Letter on Crypto-Assets

    EBA and ESMA issued a joint response to the EC letter, from July 19, 2019, on crypto-assets.

    August 20, 2019 WebPage Regulatory News
    News

    FSB on Responses to Consultation on Wind-Down of Trading Portfolios

    FSB published responses received to the consultation on the solvent wind-down of the derivatives and trading book portfolio of a global systemically important bank (G-SIB).

    August 19, 2019 WebPage Regulatory News
    News

    FSB Publishes Responses to Consultation on Resolvability Disclosures

    FSB published responses received to the consultation on disclosures for resolution planning and resolvability of banks.

    August 19, 2019 WebPage Regulatory News
    RESULTS 1 - 10 OF 3681