The European Supervisory Authorities (EBA, EIOPA and ESMA – the ESAs) have published this week a final report on the draft Regulatory Technical Standards (RTS), in which they propose to simplify the bilateral margin requirements of the Delegated Regulation (EU) 2016/2251 of the European Commission.
The proposed amendments aim to simplify the bilateral margin framework for counterparties subject to initial margin requirements and that are below the threshold of €8 billion for the exchange of initial margin as provided in the European Market Infrastructure Regulation (EMIR). The changes seek to facilitate the gradual removal of initial margin requirements for these counterparties. They also promote greater consistency with the treatment applied in other jurisdictions.
Under the current framework, counterparties that are below the threshold are exempt from exchanging initial margin for new contracts of over-the-counter (OTC) uncollateralised derivatives, but continue to do so for existing contracts. With the proposed amendments, counterparties would no longer be required to exchange initial margin, for both new and existing contracts, if they are below the threshold.
The amendments respond to requests from market participants and support the broader objectives of the ESAs for simplification and reduction of administrative burden.
Next steps
The final report has been submitted to the European Commission along with the draft regulatory technical standards (RTS) for its approval. Following the review and adoption process by the Commission, the RTS will be subject to scrutiny by the European Parliament and the Council before publication in the Official Journal of the European Union.