EMIR for asset servicers and custodians
The EU’s response to an international commitment: An opportunity or a challenge?
The 2008 financial crisis which caused the default of Lehman and the near collapse of Bear Stearns was responsible for highlighting the lack of counterparty risk management and transparency in the over the counter (OTC) derivatives market. In response, G20 countries met in Pittsburgh in September 2009 and passed a resolution stating that business as usual was going to have to change - “all standardised OTC derivative contracts should be traded on exchanges or electronic trading platforms, where appropriate, and cleared through central counterparties. OTC derivative contracts should be reported to trade repositories. Non-centrally cleared contracts should be subject to higher capital requirements.”
For Europe, this has resulted in the European Market Infrastructure Regulation (EMIR) which sets out to increase stability within and achieve effective regulatory oversight of the OTC derivative markets, while reducing risk and increasing transparency. Although EMIR imposes obligations on all participants in the derivatives market, this article outlines the implications as they apply specifically the asset servicing community and the potential opportunities it presents for these participants.