05 May 2017
Brussels
Reporter: Drew Nicol

Pension funds given three-year exemption to EMIR central clearing


Pension funds have been handed a three-year exemption from central clearing of over-the-counter (OTC) derivatives under the European Market Infrastructure Regulation (EMIR).

The European Commission proposed reforms to EMIR yesterday (4 May) following a multi-year review of the 2012 regulation of OTC derivatives.

Pension funds will be given the three-year reprieve because they “do not have normally access to the necessary cash collateral, and no specific solutions have been developed so far”, according to the European Commission.

The European Commission has extended the exemption for pension funds twice before. They were due to comply with EMIR’s central clearing obligation by August 2018.

“[The three-year exemption] will allow the various counterparties involved, including pension funds, central counterparties and the clearing members that provide clearing services, to develop a solution that enables pension funds to participate in central clearing without negatively impacting the revenues of future pensioners,” the European Commission explained.

The EMIR proposal also introduces more proportionate rules for corporates, re-focuses the scope of the clearing obligation for financial counterparties to include additional relevant market players while exempting the smallest, and streamlines the application of reporting requirements. It is also proposes improvements to ensure the quality of reported data.

Valdis Dombrovskis, vice president responsible for financial stability, financial services and capital markets union at the European Commission, said: "EMIR is at the heart of the EU's financial reforms. Today's proposal ensures that EMIR achieves its objective of reducing systemic risk in the OTC derivatives market, while keeping costs to a minimum for the real economy.”

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