The European Systemic Risk Board (ESRB) has published a report concerning the revision of the European Market Infrastructure Regulation (EMIR).

In the report the ESRB:

• shares the European Commission’s (Commission) assessment that no fundamental change to the core requirements of EMIR are needed but considers the EMIR review as an opportunity to improve some aspects of the Regulation;
• reiterates that enhancing procyclicality-limiting tools in EMIR would reduce risks to financial stability and could simplify requirements and increase their efficiency. The ESRB sees the need to include a definition of procyclicality in the EMIR Level 1 text and to have more granular requirements for the operationalisation of the EMIR tools designed to limit the procyclicality of margin and haircut requirements. The ESRB would also welcome the mandatory adoption by central counterparties (CCPs) of a holistic approach to procyclicality, which should take into account the combined effect of margin, haircut and add-on requirements. At the same time, it highlights the possibility that procyclicality could be transmitted (or even generated within) the relationship between clearing members and their clients;
• welcomes the Commission’s commitment to assessing how to streamline and improve the framework of trade reporting data. It believes that it should be further clarified that, when the need to impose a clearing obligation on certain over-the-counter (OTC) derivatives classes is assessed, the evaluation by the European Securities and Markets Authority (ESMA) of the systemic risks stemming from OTC derivatives should be performed at both the EU and national levels. The ESRB reaffirms its proposal for a legal obligation for all CCPs to publish quantitative and qualitative information consistent with the Committee on Payments and Markets Infrastructures and the International Organization of Securities Commissions public disclosure framework;
• advises caution regarding exemptions from central clearing and agrees with the Commission’s assessment that disproportionate costs and burdens need to be reduced. However, it also supports a broad application of the clearing obligation, including for pension scheme arrangements and large non-financial counterparties that are active in the derivatives market;
• sees a need for a comprehensive review of EMIR in the future, this would include addressing the potential use of margins and haircuts to meet macro-prudential objectives;
• affirms previous proposals, such as revising the determination mechanism of dedicated resources (skin in the game) and interoperability arrangements; and
• highlights some issues which are deemed important but for which it is not delivering proposals. These include reinforcing the framework under which third-country CCPs are recognised to provide clearing services in the EU.

View ESRB report on revision of EMIR, 21 April 2017