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
March 13, 2019

EC published the Delegated Regulation (EU) 2019/397 regarding the date until which counterparties may continue to apply their risk-management procedures for certain over-the-counter (OTC) derivative contracts not cleared by a central counterparty (CCP). Regulation 2019/397 amends the Delegated Regulation (EU) 2016/2251 supplementing European Market Infrastructure Regulation (No 648/2012), or EMIR, and it shall enter into force on the day following that of its publication in the Official Journal of the European Union.

The requirement to exchange collateral, as set out in EMIR in respect of OTC derivative contracts not cleared by a CCP, does not take into account the eventuality of a member state withdrawing from EU. The challenges faced by those parties to an OTC derivative contract whose counterparties are established in UK are a direct consequence of an event that is beyond their control and may put them at a disadvantage compared to other counterparties in EU. Commission Delegated Regulation (EU) 2016/2251 specifies different dates of application of the procedures to exchange collateral for non-centrally cleared OTC derivative contracts, depending on the category of counterparty to those contracts.

Before EMIR and Delegated Regulation (EU) 2016/2251 applied, counterparties to non-centrally cleared OTC derivative contracts were not required to exchange collateral and bilateral trades were, therefore, not collateralized or they were collateralized on a voluntary basis. If counterparties were required to exchange collateral as a result of novating their contracts to address the withdrawal of UK from EU, the remaining counterparty may not be able to agree to the novation. To ensure smooth functioning of the market and a level playing field between counterparties established in EU, counterparties should be able to replace counterparties established in UK with counterparties in a member state without being required to exchange collateral in respect of those novated contracts. The date from which they should be required to exchange collateral for the novation of those contracts should be 12 months after the date of application of this amending Regulation. Delegated Regulation (EU) 2016/2251, therefore, has been amended accordingly. Consequently, in the Delegated Regulation (EU) 2016/2251, Article 35 that addresses "transitional provisions" has been replaced.

Regulation (EU) 2019/397 shall apply from the date following that on which the Treaties cease to apply to, and in, UK pursuant to Article 50(3) of the Treaty on EU. However, this Regulation shall not apply in case a withdrawal agreement concluded with UK has entered into force by that date or a decision has been taken to extend the two-year period referred to in Article 50(3) of the Treaty on EU.


Related Links

Effective Date: March 14, 2019

Keywords: Europe, EU, UK, Securities, Banking, EMIR, OTC Derivatives, CCP, Brexit, Non-Centrally Cleared Derivatives, Regulation 2019/397, EC

Related Articles

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

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

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 16, 2019 WebPage Regulatory 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

PRA Seeks Input and Issues Specifications for Insurance Stress Tests

PRA announced that it will conduct an insurance stress test for the largest regulated life and general insurers from July to September 2019.

April 15, 2019 WebPage Regulatory News

PRA Finalizes Policy on Approach to Managing Climate Change Risks

PRA published the policy statement PS11/19, which contains final supervisory statement (SS3/19) on enhancing banks’ and insurers’ approaches to managing the financial risks from climate change (Appendix).

April 15, 2019 WebPage Regulatory News

EBA Single Rulebook Q&A: First Update for April 2019

EBA published answers to nine questions under the Single Rulebook question and answer (Q&A) updates for this week.

April 12, 2019 WebPage Regulatory News

EIOPA Statement on Application of Proportionality in SCR Supervision

EIOPA published a supervisory statement on the application of proportionality principle in the supervision of the Solvency Capital Requirement (SCR) calculated in accordance with the standard formula.

April 11, 2019 WebPage Regulatory News

FED Updates Form and Supplemental Instructions for FR Y-9C Reporting

FED updated the form and supplemental instructions for FR Y-9C reporting. FR Y-9C is used to collect data from domestic bank holding companies, savings and loan holding companies, U.S intermediate holding companies, and securities holding companies with total consolidated assets of USD 3 billion or more.

April 11, 2019 WebPage Regulatory News

OSFI Finalizes Guidelines on Liquidity Adequacy and NSFR Disclosures

OSFI published the final Liquidity Adequacy Requirements (LAR) guideline and the net stable funding ratio (NSFR) disclosure requirements guideline.

April 11, 2019 WebPage Regulatory News
RESULTS 1 - 10 OF 2920