Following the early February political sign-off by Parliament and Council negotiators in trialogue of the EMIR Refit agreement that was struck before Christmas between the Council and rapporteur Langen, we wanted to share with you the latest technical drafting that has emerged.
In particular on the core issues for corporates:
- Reporting of intragroup transactions – there will be a full exemption from the reporting obligation for intragroup transactions (on a global scale), as long as one of the two entities is an NFC and so long as the parent undertaking is an NFC.
- Reporting of external transactions – there will be a full shift of liability, with the FC being solely responsible for timely and accurate reporting of the details of OTC contracts on behalf of both counterparties.
The NFC would remain liable and accountable for passing information that the FC cannot be reasonably expected to have on to their reporting counterparty (for that information the NFC would remain liable in case of misinformation/false or bad information).
Not included in the reporting relief are transactions between NFCs and third country financial counterparties. Those would continue having to be reported by the NFC, unless the financial counterparty is located in a jurisdiction that has been deemed equivalent to the EU for EMIR reporting purposes. For the time being, no jurisdiction has been found equivalent in this context.
- Residual reporting liabilities –The language now reads that non-reporting counterparties – upon request – should be granted access to trade repositories on reasonable commercial terms. (This removes residual concerns with regard to NFC having to verify the accuracy of data in trade repositories).
- Hedging exemption maintained– the corporate hedging exemption is maintained as is.
The language that was inserted in Parliament with regard to interconnectedness of FCs and NFCs and frequent recalibration of the clearing thresholds has been tamed to only reference the interconnectedness of financial counterparties and that ESMA should periodically review the clearing thresholds and where appropriate submit a draft change of the pertinent regulatory technical standard to the European Commission for approval. ESMA when doing so would also need to consult the European Systemic Risk Board first.
A proposal by the Parliament to change the definition of hedging is not included in the latest technical wording.
- Move to asset-class specific calculation of the clearing threshold for NFCs – with NFCs required to calculate their positions for the purposes of the clearing threshold annually on the basis of a 12 months average.
Note that the extension of the asset-class-by-asset class determination of the clearing threshold has not been extended to the bilateral risk mitigation requirements as had been initially proposed by the European Parliament.
- European Commission to assess potential duplicative reporting requirements and in particular focus on ways to further simplify reporting for non-OTC contracts in particular for NFCs
In terms of next steps, we would expect the text to be finalised shortly and then consolidated for final approval in both Council and Parliament.
In terms of entry into force, all new requirements will apply 20 days after publication in the Official journal, with the following exceptions:
- the new reporting framework, which will apply 12 months after entry into force of the text.
- the new rules for reporting of intragroup transactions would apply with entry into force of the text
Prepared by FleishmanHillard for the EACT
February 2019
