The draft calls for a pause for review of several specifics: Non-financial companies have started preparations to implement the new regulation and are realising that certain provisions add unnecessary red tape and damage the real economy without giving much extra safety and stability to the financial system. Furthermore, neither companies, nor banks or systems providers are nearly ready for some of the changes. The ACT welcomes the proposal from ECON asking the Commission and ESMA to rethink how the rules impact non-financial companies. ECON‘s proposals recognise that the regulation of derivatives is primarily driven by the need to reduce contagion risk between financial firms. John Grout, ACT Policy and Technical Director said:
Derivatives, properly used, are an important part of good treasury management and we fear that excessive regulation can discourage sound risk management practices. This partial pushback from the European Parliament recognises that the real economy does need ready access to financial products.
The pause for a rethink, if passed, will give an additional window for firms to prepare and should help an orderly transition to the new regulations. -----Ends------- NOTES TO EDITORS EMIR requires companies to clear derivatives if the volume of transactions exceeds any of a set of clearing thresholds. As originally drafted, the rules mean that crossing the threshold for one class of derivatives triggers all derivatives into clearing and the obligation to post collateral, even if those other derivatives are used for commercial hedging purposes. The obligations around confirmation procedures for derivatives contain a strong push towards electronic confirmations. The ECON resolution correctly recognises that for smaller companies this may not be appropriate and that manual procedures may be more practical. If the Parliament approves the draft, the delay will in any case help implementation and we would hope that the review of some of the specifics will lead to greater reality in the rules.