Update on EMIR: implementation phase


bordeausquare The European Market Infrastructure Regulation (EMIR) passed another important milestone on 15 March 2013, with the entry into force of key Regulatory Technical Standards (RTSs) required to implement the regulation. EMIR, which requires central clearing of certain over-the-counter derivatives and lays down reporting requirements, became law in August 2012. At the same time, the European Securities and Markets Authority (ESMA) and the European Commission have been working on the nuts and bolts of its implementation. In February 2013, Members of the European Parliament gave way on their earlier threat to derail the RTSs, having extracted some assurances from the Commission and ESMA that the Parliament will have a greater role during the drafting of future RTSs.

Concerns persist, however, amongst financial market participants over the lack of a comprehensive cumulative impact assessment studying the overall effects of the cascade of regulatory changes (including EMIR). The fear is that many unintended consequences could be unleashed such as overlapping requirements with other draft proposals, a collateral crunch and a drain on liquidity. All this could have a negative impact on bank lending and weigh further on economic growth.

While some provisions of EMIR started to apply as of 15 March, and other reporting requirements are likely to begin late 2013, important implementation milestones remain ahead. These include the substance of risk mitigation techniques for non-centrally cleared derivatives and cross border application issues, including in particular, EMIR’s interaction with the US Dodd-Frank Act.

Ultimately, central clearing in relation to EMIR is not expected to take place before the summer of 2014.

By Joe McHale - Adviser Financial Markets : j.mchale@ebf-fbe.eu