EC Welcomes Agreement on Targeted Reforms Related to OTC Derivatives
EC welcomed the political agreement reached by the European Parliament and EU member states on the targeted reform of the European Market Infrastructure Regulation (EMIR). This political agreement will be followed by further technical work before the European Parliament and the Council can formally adopt the final texts.
This regulation was adopted in 2012 following the financial crisis to better manage and monitor the risks arising from derivatives markets for financial stability. The reform will provide simpler and more proportionate rules for over-the-counter (OTC) derivatives, helping to reduce costs and regulatory burdens for market participants without compromising financial stability. First presented by the Commission in 2017, this initiative builds on the results of the EC Call for Evidence, a public consultation looking at the cumulative effect of the new financial sector rules put in place since the crisis, and is a prime example of better regulation in practice: the revised rules improve the efficiency of the market while maintaining prudential objectives.
The reform of the EMIR will bring more proportionate rules for corporates. It exempts the smallest financial counterparties from the clearing obligation, while ensuring that the overwhelming majority of trades in the relevant classes of derivatives continues to be cleared in central counterparties. The reporting requirements, which ensure that supervisors dispose of full information on derivatives markets, are streamlined and will be more proportionate while the quality of the reported data is ensured. Some more time is granted to developing solutions for pension funds before they have to start clearing derivatives in central counterparties. The progress towards these clearing solutions will be carefully monitored.
EMIR implements the 2009 G20 commitment to increase the stability of the OTC derivatives market in the EU. The main objective of EMIR is to reduce systemic risk by increasing the transparency of the OTC derivatives market, by mitigating the counterparty credit risk, and by reducing the operational risk associated with OTC derivatives. It includes several measures: that all standardized OTC derivatives contracts be cleared through central counterparties (CCPs) and that OTC derivatives contracts be reported to trade repositories.
Related Link: Press Release
Keywords: Europe, EU, Banking, Securities, EMIR, OTC Derivatives, Clearing Obligation, Pension Funds, CCPs, EC
Featured Experts
Blake Coules
Across 35 years in banking, Blake has gained deep insights into the inner working of this sector. Over the last two decades, Blake has been an Operating Committee member, leading teams and executing strategies in Credit and Enterprise Risk as well as Line of Business. His focus over this time has been primarily Commercial/Corporate with particular emphasis on CRE. Blake has spent most of his career with large and mid-size banks. Blake joined Moody’s Analytics in 2021 after leading the transformation of the credit approval and reporting process at a $25 billion bank.
Related Articles
BIS and Central Banks Experiment with GenAI to Assess Climate Risks
A recent report from the Bank for International Settlements (BIS) Innovation Hub details Project Gaia, a collaboration between the BIS Innovation Hub Eurosystem Center and certain central banks in Europe
Nearly 25% G-SIBs Commit to Adopting TNFD Nature-Related Disclosures
Nature-related risks are increasing in severity and frequency, affecting businesses, capital providers, financial systems, and economies.
Singapore to Mandate Climate Disclosures from FY2025
Singapore recently took a significant step toward turning climate ambition into action, with the introduction of mandatory climate-related disclosures for listed and large non-listed companies
SEC Finalizes Climate-Related Disclosures Rule
The U.S. Securities and Exchange Commission (SEC) has finalized the long-awaited rule that mandates climate-related disclosures for domestic and foreign publicly listed companies in the U.S.
EBA Proposes Standards Related to Standardized Credit Risk Approach
The European Banking Authority (EBA) has been taking significant steps toward implementing the Basel III framework and strengthening the regulatory framework for credit institutions in the EU
US Regulators Release Stress Test Scenarios for Banks
The U.S. regulators recently released baseline and severely adverse scenarios, along with other details, for stress testing the banks in 2024. The relevant U.S. banking regulators are the Federal Reserve Bank (FED), the Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC).
Asian Governments Aim for Interoperability in AI Governance Frameworks
The regulatory landscape for artificial intelligence (AI), including the generative kind, is evolving rapidly, with governments and regulators aiming to address the challenges and opportunities presented by this transformative technology.
EBA Proposes Operational Risk Standards Under Final Basel III Package
The European Union (EU) has been working on the final elements of Basel III standards, with endorsement of the Banking Package and the publication of the European Banking Authority (EBA) roadmap on Basel III implementation in December 2023.
EFRAG Proposes XBRL Taxonomy and Standard for Listed SMEs Under ESRS
The European Financial Reporting Advisory Group (EFRAG), which plays a crucial role in shaping corporate reporting standards in European Union (EU), is seeking comments, until May 21, 2024, on the Exposure Draft ESRS for listed SMEs.
ECB to Expand Climate Change Work in 2024-2025
Banking regulators worldwide are increasingly focusing on addressing, monitoring, and supervising the institutions' exposure to climate and environmental risks.
