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December 18, 2018

ESAs published two joint draft regulatory technical standards (RTS) to amend the RTS on the clearing obligation and risk mitigation techniques for non-cleared OTC derivatives. These standards provide a specific treatment for simple, transparent and standardized (STS) securitization to ensure a level playing field with covered bonds. They are required for the proper implementation of the European Market Infrastructure Regulation (EMIR) and will amend the current regulation on the clearing obligation and risk mitigation techniques on OTC derivatives not cleared by central counterparties (CCPs).

Draft RTS on Risk Mitigation Techniques. ESAs are amending the Delegated Regulation (EU) 2016/2251 on risk-mitigation techniques for OTC derivative contracts not cleared by a central counterparty (CCP) under Article 11(15) of EMIR (Regulation No 648/2012) in the context of STS securitizations under the Securitization Regulation (Regulation No 2017/2402). The draft RTS amend the existing RTS by extending the special treatment currently associated with covered bonds to STS securitizations. The Securitization Regulation amends EMIR to ensure consistency of treatment between derivatives associated with covered bonds and derivatives associated with securitizations, with regard to the clearing obligation and the margin requirements on non-centrally cleared OTC derivatives. The treatment, which allows no exchange of initial margin and only collection of variation margin, is applicable only where a STS securitization structure meets a specific set of conditions equivalent to the ones required for covered bond issuers to be able to benefit from that same treatment. 

Draft RTS on Clearing Obligation Under the Securitization Regulation. These RTS address amendments to the EMIR Clearing Obligation under the Securitization Regulation. EMIR, as amended by the Securitization Regulation, requires under Article 4(6) that the ESAs develop draft RTS specifying the criteria for establishing which arrangements under covered bonds or securitizations adequately mitigate counterparty risk with regard to the clearing obligation. The final report covers the draft RTS that specify the criteria for establishing which arrangements under covered bonds or securitizations adequately mitigate counterparty risk with regard to the clearing obligation and the that amend the three Commission Delegated Regulations on the clearing obligation with regard to the covered bond provisions. The final report is submitted to EC for endorsement of the draft RTS presented in Annex. From the date of submission, EC should take, within three months, the decision on whether to endorse the RTS.

 

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Keywords: Europe, EU, Banking, Securities, Insurance, Securitization Regulation, STS Regulation, EMIR, OTC Derivatives, Clearing Obligation, Covered Bonds, Regulatory Technical Standards, ESAs

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