Notification about exemption from collateralisation obligations
Delegated Regulation (EU) No. 2016/2251 has been in force since 24 January 2017 and requires that counterparties shall establish, apply and document risk management procedures for the exchange of collateral for non-centrally cleared OTC derivative contracts (see Article 2(1) delReg 2016/2251 and also Article 11(3) EMIR).
The counterparties of derivative contracts concluded within a group (intragroup transactions – IGT) may be exempted from this requirement by the national competent authorities subject to certain conditions being fulfilled, cf. Article 11(6 to 10) EMIR.
An intragroup transaction that is entered into by counterparties which are established in different Member States shall be exempt totally or partially from the collateralisation requirement on the basis of a positive decision of the relevant competent authorities or an agreement of both notified competent authorities, as the case may be.
Pursuant to Article 11(5) EMIR, the collateralisation requirement shall not apply to intragroup transactions between counterparties established in the same Member State (e.g. groups with members only in Austria), provided that no current or foreseen practical or legal impediment for the prompt transfer of own funds or the repayment of liabilities exists. In such instances, no application or notification shall be sent to the FMA.
Where the counterparties are not established in the same Member State, financial counterparties (FC) and non-financial counterparties (NFC) may be exempted from this collateralisation obligation where the requirements pursuant to Article 11(6-10) EMIR are fulfilled.
It is important to differentiate between a total of five potential constellations in relation to the exemption from the collateralisation obligation (excluding Article 11(5) EMIR – see above):
The exemption may only be exercised if the following conditions are fulfilled:
- Both counterparties are fully consolidated members of a group (Article 3(2) a) EMIR)
- Adequate centralised risk evaluation, measurement and control procedures exist (Article 3(2) a) EMIR)
- The risk management procedures of the counterparties must be adequately sound and robust, and be consistent to the level of complexity of the derivative contract (Article 11(6-10) a) EMIR)
- There shall be no current or foreseen practical or legal impediment to the prompt transfer of own funds or repayment of liabilities between the counterparties (Article 11(6-10) b) EMIR)
Total or partial exemption
Pursuant to EMIR, intragroup transactions involving one or more FC may be exempt totally or partially from the collateralisation requirement, where a partial exemption means that such intragroup transactions shall only be exempt from initial margin but not from variation margin. FMA may grant a partial exemption if the assessment of the group’s risk management framework justifies an exemption only from initial margin.
EMIR does not provide for the possibility of a full scope exemption from the collateralisation obligation. Article 18(2) of Delegated Regulation No 149/2013 states that as part of its application or notification to the relevant competent authority, a counterparty shall also submit supporting information evidencing that the conditions of Article 11(6-10) EMIR are fulfilled. The supporting documents shall include information on risk management procedures, historical transaction information, and the relevant contracts between the parties. Regarding historical data, applying or notifying entities shall provide all OTC derivative transactions entered into by the intragroup counterparties over the last twelve months for all asset classes for which an exemption from the collateralisation obligation is applied (see below Annex B).
Article 36(2) of Delegated Regulation (EU) No 2016/2251 determines the interim solution for third country groups:
Counterparties of intragroup transactions may submit an application to FMA to have their collateralisation obligation temporarily suspended if and when one counterparty is established in Austria and the other intragroup counterparty is established in a third country (non-EU member state). Such suspension may include the following intragroup transactions: FC/FC, NFC/NFC, or FC/NFC. As long as the European Commission has not published an equivalence decision on Article 11(3) EMIR for a specific third country pursuant to Article 13(2) EMIR, the collateralisation obligation may be suspended until 30 June 2022 pursuant to Article 1(3) b) Delegated Regulation (EU) No 2021/236. The European Commission has taken equivalence decisions for a select number of third countries (USA, Japan, Brazil, Australia, Canada, Hong Kong, Singapore). Where an equivalence decision has been adopted pursuant to Article 13(2) EMIR for the purposes of Article 11(3) EMIR in respect of the relevant third country, counterparties may apply for an exemption from the collateralisation obligation per the procedure of Article 11(8) EMIR within four months of the date of entry into force of such equivalence decision. FMA is the national competent authority responsible for the exemption decision.
Notifications pursuant to Article 11 (6-10) EMIR shall be submitted via the FMA – IGT Tool
Notifications pursuant to Article 11(6-10) EMIR shall be submitted via the FMA IGT Tool.
New users can find all the relevant information on access to the FMA IGT Tool and setting up an account in the IGT Manual The counterparty seeking an exemption from the collateralisation obligation for intragroup transactions pursuant to Article 11 (6-10) EMIR shall submit a declaration to the following email address: [email protected]
The conditions for an exemption shall be evidenced by detailed information. To ensure a consistent approach, the following templates shall be used for this purpose:
Annex A: Evidence of compliance with Article 3 EMIR (definition of the group) and with Article 11 EMIR (risk management procedures of the counterparties are adequately sound and robust and correspond to the level of complexity of the derivative contract or no legal or practical impediments exist for the prompt transfer of own funds or the repayment of liabilities between the counterparties)
FMA declaration: confirmation of power of attorney to submit notifications to the FMA on behalf of the group. Existing FMA IGT Tool users are required to upload this declaration again as Annex Z. New users shall submit the declaration in advance during the access checking process for the tool (together with a copy of an identification document and excerpt from the Commercial Register („Firmenbuchauszug”). The declaration shall be sent to the following email address: [email protected]
Article 32 delReg 2016/2251 states that an application or notification pursuant to Article 11(6-10) EMIR shall be deemed to have been received (i.e. considered complete) when the competent authority receives all of the relevant information it requires to assess the application or notification. The competent authority shall submit a written request for information to the counterparty where it determines that further information is required in order to assess whether the conditions referred to in Article 11(6-10) EMIR, respectively, are fulfilled.
Pursuant to Article 32(10) delReg 2016/2251, counterparties that have submitted a notification or received a positive decision according to Article 11(6-10) EMIR, respectively, shall immediately notify the relevant competent authority of any change that may affect the fulfilment of the conditions set out in those paragraphs, as applicable. The competent authority may object to the application for the exemption or withdraw its positive decision following any change in circumstances that could affect the fulfilment of those conditions.
Pursuant to the FMA Regulation on Fees, Accounting Group 3 (securities supervision) tariff item III.G.8., a fee of EUR 2,000.00 will be charged for considering an application for an exemption from the intragroup clearing obligation pursuant to Article 11(6-10) EMIR.