EMIR – COVID-19: ESAs’ joint RTS on amendments to the bilateral margin requirements


EMIR – COVID-19: ESAs’ joint RTS on amendments to the bilateral margin requirements

6 May 2020

Regulatory News Alert

Context and objectives

On 4 April 2020, in response to the COVID-19 outbreak, the European Supervisory Authorities (ESAs) updated the Final Report on the Regulatory Technical Standards (RTS) on various amendments to the bilateral margin requirements (Commission Delegated Regulation (EU) No 2016/2251). This updated version takes into account the related decision from the Basel Committee on Banking Supervision (BCBS) and International Organization of Securities Commissions (IOSCO), on 3 April 2020, to defer by one year the implementation of the remaining phases of the initial margin requirements.

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With the same purpose as the previous version on 5 December 2019, this Report provides explanations on the draft RTS amending the current Commission Delegated Regulation on bilateral margining with respect to the treatment of physically settled FX forward and swap contracts, intragroup contracts, equity option contracts and the implementation of the initial margin requirements.


Proposed amendments and clarifications

In view of the broad range of issues that market participants are dealing with following the COVID-19 outbreak, the BCBS and IOSCO have taken into account the challenges they would face in their preparations for the remaining phases of the implementation of the requirements, and have agreed to an extension of this phase-in.

Following on from this, the ESAs have reviewed the application of the relevant requirements and have identified the amendments necessary in order to extend the implementation deadlines by one year for those counterparties in the final two phases:

  • Entities with an aggregate average notional amount (AANA) of non-centrally cleared derivatives greater than €8 billion:

The amendment will extend the implementation deadline by one year for those counterparties, which means from 1 September 2022, instead of September 2021 as mentioned in the previous version of the Report.

  • Entities with an AANA of non-centrally cleared derivatives greater than €50 billion

These changes would result in these covered counterparties becoming subject to the requirement to exchange initial margin from 1 September 2021, instead of 1 September 2020.

Concerning other amendments to the bilateral margin requirements, there is no further updates from the previous version, which means the ESAs still consider that:

  • There is no need to amend the Delegated Regulation on bilateral margin requirements in order for counterparties below the €50 million initial margin exchange threshold not to be required
  • The counterparties may provide in their risk management procedures that variation margins are not required to be posted or collected for either physically settled foreign exchange (FX) forward contracts or physically settled foreign exchange swap contracts, except between institutions
  • Temporary exemption for single-stock equity options and index options will be extended by one year
  • Temporary exemption for intragroup transactions will be extended to 21 December 2020


Next Steps

This updated version of the Final Report on the draft RTS on bilateral margining will replace entirely the version submitted to the Commission in December 2019. The ESAs have submitted this second version of the draft RTS to the Commission for endorsement in the form of a Commission Delegated Regulation.

Following the endorsement, they are then subject to non-objection by the European Parliament and the Council before they can be published in the Official Journal and subsequently enter into force.

With regards to the above-mentioned deadlines and the bilateral margin requirements and the implementation of the last phase of the initial margin requirements as proposed in the draft RTS, the ESAs expect competent authorities to apply the EU framework in a risk-based and proportionate manner until the amended RTS enter into force.


How can Deloitte help?

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Deloitte Luxembourg EMIR Services can help your organization analyze any current gaps by implementing regulatory health checks, proposing remediation plans, and defining an appropriate governance framework (contracts, risk management, and control).

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Subject matter specialists

Pascal Martino
Partner – Banking Leader
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Laurent Collet
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Kevin Demeyer
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