Featured Product

    ESMA Issues Clarifications on Clearing and Trading Obligations

    October 31, 2018

    ESMA issued clarifications for clearing and trading obligations under the European Market Infrastructure Regulation (EMIR or Regulation No 648/2012), ahead of the December 21, 2018 deadline. The statement addresses the challenges that certain groups and non-financial counterparties above the clearing threshold (NFCs+) would face on December 21, 2018, when they start central clearing of some of the over-the-counter (OTC) derivative contracts and trading them on trading venues.

    Under the EMIR, both the following expire on December 21, 2018, for the interest rate derivative classes denominated in the G4 currencies subject to the clearing obligation:

    • The current derogation from the clearing obligation for certain intragroup transactions concluded with a third country group entity
    • The phase-in for counterparties in Category 4, broadly speaking NFCs+

    With respect to the current derogation from the clearing obligation for certain intragroup transactions concluded with a third country group entity, given the absence of equivalence decisions, ESMA undertook a review of the Commission Delegated Regulations on the clearing obligation and developed draft amendments to extend the derogation expiration to December 21, 2020. Whereas, with respect to the phase-in for counterparties in Category 4, the proposal of EC to amend EMIR, which was published in May 2017 (REFIT) and is being negotiated by the EU institutions, envisages that NFCs+ would only be subject to the clearing obligation in the asset class(es) where their level of activity is above the clearing threshold.

    In case the amendments mentioned above have not entered into force by the current expiration date, these counterparties would need to have clearing arrangements in place and start clearing these transactions, before they are once again no longer required to do so after the amendments enter into force. Furthermore, given the link between the MiFIR trading obligation and the EMIR clearing obligation, this potential timing gap would also have implications regarding the trading obligation. ESMA expects competent authorities to:

    • Not prioritize their supervisory actions toward group entities that benefit from the derogation for intragroup transactions meeting certain conditions on and after December 21, 2018
    • Not prioritize their supervisory actions toward NFCs+ that are not above the clearing threshold (as prescribed under the EMIR legislation) in the interest rate derivative asset class on or after December 21, 2018
    • Generally apply their risk-based supervisory powers in their day-to-day enforcement of applicable legislation in this area in a proportionate manner


    Related Links

    Keywords: Europe, EU, Securities, Clearing Obligation, Trading Obligation, CCPs, NFC+, Intragroup Transactions, EMIR, ESMA

    Related Articles
    News

    PRA Finalizes Supervisory Approach for Non-Systemic Banks in UK

    PRA published the policy statement PS8/21, which contains the final supervisory statement SS3/21 on the PRA approach to supervision of the new and growing non-systemic banks in UK.

    April 15, 2021 WebPage Regulatory News
    News

    EBA Finalizes Standards on Methods of Prudential Consolidation

    EBA published a report that sets out the final draft regulatory technical standards specifying the conditions according to which consolidation shall be carried out in line with Article 18 of the Capital Requirements Regulation (CRR).

    April 15, 2021 WebPage Regulatory News
    News

    EBA Updates List of Other Systemically Important Institutions in EU

    EBA updated the list of other systemically important institutions (O-SIIs) in EU.

    April 15, 2021 WebPage Regulatory News
    News

    BCBS Report Concludes Basel Risk Categories Can Capture Climate Risks

    BCBS published two reports that discuss transmission channels of climate-related risks to the banking system and the measurement methodologies of climate-related financial risks.

    April 14, 2021 WebPage Regulatory News
    News

    UK Authorities Welcome FSB Review of their Remuneration Regime

    UK Authorities (FCA and PRA) welcomed the findings of FSB peer review on the implementation of financial sector remuneration reforms in the UK.

    April 14, 2021 WebPage Regulatory News
    News

    PRA and FCA Letter on Addressing Risks from Use of Deposit Aggregators

    PRA and FCA jointly issued a letter that highlights risks associated with the increasing volumes of deposits that are placed with banks and building societies via deposit aggregators and how to mitigate these risks.

    April 14, 2021 WebPage Regulatory News
    News

    MFSA to Amend Banking Act and Rules in Coming Months to Transpose CRD5

    MFSA announced that amendments to the Banking Act, Subsidiary Legislation, and Banking Rules will be issued in the coming months, to transpose the Capital Requirements Directive (CRD5) into the national regulatory framework.

    April 14, 2021 WebPage Regulatory News
    News

    EC Delegated Regulation on Specialized Lending Exposures Under CRR

    EC finalized the Delegated Regulation 2021/598 that supplements the Capital Requirements Regulation (CRR or 575/2013) and lays out the regulatory technical standards for assigning risk-weights to specialized lending exposures.

    April 14, 2021 WebPage Regulatory News
    News

    OSFI Proposes to Enhance Assurance Expectations for Basel Returns

    OSFI launched a consultation to explore ways to enhance the OSFI assurance over capital, leverage, and liquidity returns for banks and insurers, given the increasing complexity arising from the evolving regulatory reporting framework due to IFRS 17 (Insurance Contracts) standard and Basel III reforms.

    April 13, 2021 WebPage Regulatory News
    News

    ECB Issues Results of Benchmarking Analysis of Recovery Plans of Banks

    ECB published results of the benchmarking analysis of the recovery plan cycle for 2019.

    April 13, 2021 WebPage Regulatory News
    RESULTS 1 - 10 OF 6858