Revision should be well balanced, sloves some of challenges probosed by EMIR I.
Published: 2 July 2018
ESBG believes it is important that the revision is well balanced and solves some of the challenges proposed by EMIR I. ESBG strongly supports the European Commission’s objective to introduce more proportionality within the EMIR framework. In particular, the clearing and reporting obligations for small and medium credit institutions should be adapted to compensate for their competitive disadvantage against bigger credit institutions. Indeed, many credit institutions are forced to use clearing members as intermediaries to clear derivatives through a CCP. This leads to additional burdens for small and medium credit institutions as they have to pay the clearing member for the service and have to assume some additional risks. Additionally, small and medium credit institutions that clear OTC derivatives through a clearing member are unable to benefit from the same capital treatment and have to apply higher capital requirements. ESBG therefore supports the introduction of a clearing threshold for small and medim credit institutions, similar to the one granted for non-financial counterparties.
In addition, ESBG suggests introducing an EMIR-specific derivatives definition or at least granting ESMA the authority to clarify the precise scope of the definition for the purposes of EMIR. Indeed the reference to MiFID’s definition creates considerable confusion and uncertainty as it is ill suited for application under EMIR because of the different objective it pursues. To this day, the question of the precise material scope of the EMIR obligations results in considerable confusion and uncertainty and is interpreted differently among Member States. A uniform application of the definition of derivatives across all Member States for the purposes of EMIR is essential to ensure a consistent and functioning regulatory framework. Finally, ESBG supports a proportionate approach for “Employee Share Purchase Plans” that should be left out of the clearing obligation.
On 4 May 2017, the European Commission proposed some targeted reforms aimed at improving the functioning of the derivatives market in the EU. The reforms propose simpler and more proportionate rules for over-the-counter derivatives to reduce costs and regulatory burdens for market participants without compromising financial stability.