EMIR REFIT ("EMIR 2.1") | FMA Österreich

EMIR REFIT (“EMIR 2.1”)

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Regulation (EU) No. 2019/834 amending the European Market Infrastructure Regulation (EMIR) was published in the Official Journal of the European Union on 28 May 2019 (EMIR-REFIT) and formally entered into force on 17 June 2019. REFIT is a programme that is part of the European Commission’s agenda for better legislation. It guarantees that EU legal regulations provided the intended benefit for citizens, enterprises and society as a whole, while simultaneously reducing bureaucracy and reducing costs. The objective is to create simplifications in the application of the Regulation, without however altering the core requirements of the Regulation. The most important changes in the EMIR REFIT are as follows:

  • Removal of the “frontloading” provision, which stipulated that bilateral derivative contracts with a suitably long minimum remaining maturity were also subject to the clearing requirement via a CCP even where they were concluded prior to the entry into force of the clearing obligation. (“Frontloading”)
  • Option for the calculation or non-calculation of the clearing threshold for financial counterparties (“FCs”) and non-financial counterparties (“NFCs”)
    • FCs: Every twelve months, a financial counterparty taking positions in OTC derivative contracts may calculate its aggregate month-end average position for the previous twelve months. Where a financial counterparty does not calculate its positions, or where the result of that calculation exceeds any of the clearing thresholds, then
      • the FC informs ESMA and the FMA immediately
      • the ESMA form is to be used for both reports
      • the FC must establish clearing arrangements within four months
      • the clearing obligation shall apply to all OTC derivative contracts that are subject to clearing obligations entered into or novated more than four months following the notification
      • following the entry into force of the EMIR REFIT, FCs remain subject to the clearing obligation until they demonstrate to the FMA that they are below the threshold
      • In calculating the positions all OTC derivative contracts (also hedging contracts) at group level are to be included.
    • NFCs:  As per FCs; BUT:
      • the clearing obligation only applies to OTC derivative contracts that are subject to such obligations, in which the threshold was exceeded and the calculation therefore took place; where no calculation is performed then the clearing obligation shall apply for all OTC derivative contracts subject to the clearing obligation
      • Hedging contracts are not included in the calculation
    • The clearing thresholds are defined in Article 11 of Delegated Regulation (EU) 149/2013. They are:
      •  EUR 1 bn for OTC credit derivative contracts,
      • EUR 1 bn for OTC equity derivative contracts, 
      • EUR 3 bn for OTC interest rate derivative contracts, 
      • EUR 3 bn for OTC foreign exchange derivative contracts,
      • As well as EUR 3 bn for commodity derivative contracts and others (respective gross notional value).
    • No notification to the FMA and ESMA is necessary provided that the calculation shows that the clearing threshold has not been exceeded.
  • The exemption from the clearing obligation for pensions scheme undertakings is extended until 18 June 2021
  • Removal of the need to notify about contracts that were concluded and a ended prior to the entry into force of EMIR (“Backloading”)
  • An exemption from the reporting obligation, where at least one counterparty is a non-financial counterparty, or would be considered as one were it established in the European Union, where both counterparties are within the same scope of full consolidation, where both counterparties are subject to centralised risk evaluation, measurement and control procedures, and where the parent company is not a financial counterparty. Counterparties must inform the FMA if they wish to make use of this exemption. The exemption of intra-group derivative contracts from reporting obligations shall be valid in where the FMA does not declare within three months of the day of the notification that the conditions do not exist.
    • The procedure for informing the FMA functions in the same way as the current IGT procedure for FCs: Notification to the FMA
  • FCs bear sole responsibility and assume the statutory risk for the legal liability regarding the notification of contracts with NFCs – applicable: for 12 months following the entry into force of the EMIR REFIT
    • NFCs shall however also voluntarily take over the handling of the notification; they shall then also take responsibility/liability
  • The FMA shall conduct the supervisory procedure for guaranteeing the initial and ongoing validation of the risk management procedure (regarding the exchange of collateral between counterparties using a margin model – e.g. ISDA SIMM): currently EBA is developing a technical standard about this