Political agreement reached on targeted reform of the European Market Infrastructure Regulation (EMIR) has been saved
Political agreement reached on targeted reform of the European Market Infrastructure Regulation (EMIR)
7 February 2019
Regulatory News Alert
Context and objectives
Originally adopted in 2012 the European Market Infrastructure Regulation ("EMIR") forms part of the European regulatory response to the financial crisis to better manage and monitor the risks arising from derivatives markets. It is the regulatory answer that provides rules for the central clearing of standardized OTC derivative contracts; margin and operational risk mitigation requirements for OTC derivative contracts that are not centrally cleared; reporting obligations for derivative contracts; as well as specific requirements for central counterparties (CCPs) and trade repositories (TRs).
In recent years, the EU Commission carried out an extensive assessment of EMIR with the conclusion that, while no fundamental change should be made to the nature of the core requirements of EMIR, some specific areas could be amended in order to eliminate disproportionate costs and burdens on certain derivatives counterparties and to simplify rules without compromising the objectives of the legislation.
Introduction of EMIR Refit and where we stand today
On 4 May 2017, the Commission proposed a regulation amending and simplifying EMIR in the context of its Regulatory Fitness and Performance (REFIT) program, to address disproportionate compliance costs, transparency issues and insufficient access to clearing for certain counterparties.
On 5 February 2019, the political agreement was reached by the European Parliament and EU member states on the targeted EMIR reform with the objective to bring more proportionate rules for corporates. It therefore exempts the so-called “small financial counterparties” from the clearing obligation, while ensuring that the overwhelming majority of trades in the relevant classes of derivatives continues to be cleared in central counterparties.
The reporting requirements, which ensure that supervisors dispose of full information on derivatives markets are streamlined and will be more proportionate while the quality of the reported data is ensured.
Finally, additional time is granted to developing solutions for pension funds before they have to start clearing derivatives in central counterparties.
This political agreement will be followed by further technical work before the European Parliament and the Council can formally adopt the final texts. A further delay before publication in the Official Journal of the EU should add approximately four months before the text becomes officially applicable.
How Deloitte can help you?
Since its entry into force, we have been helping our clients to comply with EMIR provisions by providing assistance on activities ranging from strategic considerations to the full implementation of its requirements.
Deloitte Luxembourg EMIR Services can help your organization analyze the current gaps with regulatory health checks, propose remediation plans, and define the appropriate governance framework (contracts, risk management, and control).
Deloitte Luxembourg can help you in your reporting with its reporting facility for EMIR, MIFIR and upcoming SFTR.
With our RegWatch Kaleidoscope service, Deloitte helps you stay on top of regulatory news and prepare your organization to address future regulatory developments.