On 17 February 2021, there was published in the Official Journal of the EU (OJ) Commission Delegated Regulation (EU) 2021/236 of 21 December 2020 amending technical standards laid down in Delegated Regulation (EU) 2016/2251 as regards to the timing of when certain risk management procedures will start to apply for the purpose of the exchange of collateral.

Commission Delegated Regulation (EU) 2016/2251 specifies, among others, the risk-management procedures, including the levels and type of collateral and segregation arrangements referred to in Article 11(3) of the European Market Infrastructure Regulation (EMIR), that financial counterparties are required to have for the exchange of collateral, with respect to their over-the-counter (OTC) derivative contracts not cleared by a central counterparty. Commission Delegated Regulation (EU) 2016/2251 implements the international framework for the exchange of collateral that has been agreed at the global level by the Basel Committee on Banking Supervision (BCBS) and the International Organization of Securities Commissions (IOSCO). In particular, Commission Delegated Regulation (EU) 2016/2251 provides for a phase-in over a number of years which reflects the implementation schedule agreed by the BCBS and IOSCO.

The BCBS and IOSCO have amended their schedule for the implementation of the requirements concerning the exchange of collateral to support the smooth and orderly implementation of the margin requirements at the international level, and in particular because smaller counterparties were not able to meet the originally envisaged deadline. In addition, there are still third countries in which certain products are not subject to equivalent margin requirements. The Delegated Regulation now published updates the implementation schedule in Commission Delegated Regulation (EU) 2016/2251 to reflect the changes at the international level.

Also, Delegated Regulation (EU) 2016/2251 provides for a deferred date of application of the bilateral margin requirements for non-centrally cleared OTC derivative contracts concluded between counterparties which are part of the same group and where one counterparty is established in a third country and the other counterparty is established in the EU. That deferred date of application was necessary to ensure that such OTC derivative contracts were not subject to the bilateral margin requirements before the adoption of an implementing act pursuant to Article 13(2) of EMIR. Despite the efforts invested to analyse third country jurisdictions in relation to which any such implementing act may be warranted, to date, only two such implementing acts have been adopted pursuant to Article 13(2) in relation to non-centrally cleared OTC derivative transactions. The application of the bilateral margin requirements for non-centrally cleared OTC derivative intragroup contracts is being further deferred by the Commission Delegated Regulation now published in order to avoid the unintended detrimental economic impact that the expiry of that exemption would have on EU firms.

The Delegated Regulation enters into force on the day following that of its publication in the OJ.

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