On 4 May 2018, the European Supervisory Authorities (ESAs) issued two consultation papers that amend the Regulatory Technical Standards (RTS) on the clearing obligation and risk mitigation techniques for over-the-counter (OTC) derivatives not cleared.

Clearing obligation

The consultation on the draft RTS on the clearing obligation clarify which arrangements under covered bonds or securitisations adequately mitigate counterparty risk and may therefore benefit from an exemption from the clearing obligation. The structure of the consultation paper contains an introduction on the clearing obligation, an overview of the objective and approach for the technical standards on the clearing obligation presented in the consultation paper, and clarifications on the conditions for the arrangements in relation to covered bonds and the arrangements in relation to securitisation that could enable to benefit from an exemption from the clearing obligation. The deadline for comments on the consultation is 15 June 2018. Once the consultation has finished the ESAs will finalise the draft RTS before they are submitted to the European Commission for endorsement in the form of a Commission Delegated Regulation.

Risk mitigation techniques

The consultation on the draft RTS on risk mitigation techniques has been produced in accordance with the amended mandate of Article 11(15) EMIR and extends the type of exemption currently associated with covered bonds, i.e. no exchange of initial margins and collection only of variation margins, to simple, transparent and standardised (STS) securitisations, under a set of conditions which are similar to the conditions required for covered bonds (i.e. that over-the-counter (OTC) derivatives are used only for hedging purposes, and there are arrangements which adequately mitigate counterparty credit risk with respect to the OTC derivative contract). The deadline for comments on the consultation is 15 June 2018.  The draft RTS will be submitted to the Commission for endorsement by 18 July 2018, following which they will be subject to scrutiny by the European Parliament and the Council, before being published in the Official Journal of the EU.