Mon, May 4, 2020

EMIR Margin Requirements Amended in Response to the COVID-19 Outbreak

The European Supervisory Authorities published proposals by way of a draft revised Regulatory Technical Standard (RTS) which, amongst other things, recommends a one-year deferral of the two implementation phases of the bilateral margining (risk mitigation techniques for non-centrally cleared OTC derivatives) requirements under the European Markets Infrastructure Regulation (EMIR). This intention to defer the application date was jointly agreed, following a decision by The Basel Committee on Banking Supervision (BCBS) and International Organization of Securities Commissions (IOSCO), in order to release operational capacity for counterparties in their response to the immediate impact of COVID-19.

This is a Final Draft of this RTS which still must still go through the trialogue process, so it’s provisions may change by the time it emerges as a Final RST at some future date. Recognizing the urgency of deferring the application date and implementing these revised provisions as soon as possible, the ESAs (ESMA, EBA and EIPOA) have indicated they expect NCAs to apply these proposed provisions now before the final RTS comes into force. 

The effect of these changes is that covered counterparties with an aggregate average notional amount of non-centrally cleared derivatives of more than €50billion will now be subject to this requirement from September 1, 2021; whilst those with an average of more than €8billion will be subject to this requirement from September 1, 2022.

The joint draft RTS can be found here.

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