European Council Adopts Updated Rules on Clearing of OTC Derivatives
European Council adopted a regulation improving the existing regulatory framework applicable to the market for over-the-counter (OTC) derivatives. This regulation, which simplifies certain aspects of the European Market Infrastructure Regulation (EMIR), will be signed in the week of May 20 and will enter into force 20 days after its publication in the Official Journal of the European Union.
The rule introduces a new category of "small financial counterparties," which will be exempted from the obligation to clear their transactions through a central counterparty (CCP), while remaining subject to risk-mitigation obligations. Smaller non-financial counterparties will also have reduced clearing obligations. In addition, the text extends by another two years (further extendable twice by an additional year) the temporary exemption from the clearing obligation of pension scheme arrangements. The updated rules also streamline the existing reporting obligations to improve the quality of the data reported, make the supervision more effective, and increase access to clearing by removing the existing unnecessary obstacles. All of this translates into simplified rules for non-financial counterparties, small financial counterparties, and pension funds using financial derivative products.
EMIR, which was adopted in 2012, forms part of the European regulatory response to the financial crisis and specifically addresses the problems encountered in the functioning of the OTC derivatives market during the 2007-2008 financial crisis. This regulation amends and simplifies EMIR to address disproportionate compliance costs, transparency issues, and insufficient access to clearing for certain counterparties.
Related Links
Effective Date: OJ+20 Days
Keywords: Europe, EU, Banking, Securities, FMI, OTC Derivatives, EMIR, Reporting, Pension Funds, CCPs, Clearing Obligation, Capital Markets Union, European Council
Featured Experts
María Cañamero
Skilled market researcher; growth strategist; successful go-to-market campaign developer
Nicolas Degruson
Works with financial institutions, regulatory experts, business analysts, product managers, and software engineers to drive regulatory solutions across the globe.
Dieter Van der Stock
IFRS subject matter expert; LDTI subject matter expert; accounting authority; risk management specialist
Previous Article
BCBS Issues Basel III Monitoring Updates for March 2018Related 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.
