The European Securities and Markets Authority (ESMA) has decided not to further extend the existing grace period for non-financial firms’ use of non-collateralised bank guarantees to cover transactions in energy derivatives cleared by European central counterparties (CCPs), for the following reasons:

  • allowing fully uncollateralised commercial bank guarantees could mean an undue source of risk for CCPs;
  • the existing three year grace period seems sufficient for the wholesale energy market to prepare for the incoming collateral obligations;
  • some European CCPs already have implemented the EMIR requirements;
  • EMIR requires that a CCP only accepts highly liquid collateral with minimal credit and market risk; and
  • a new postponement would maintain a discrepancy with international standards such as the Committee on Payments and Market Infrastructure and the International Organization of Securities Commissions Principles for Financial Market Infrastructures.

View ESMA will not exempt the collateralisation of bank guarantees for energy derivatives under EMIR, 19 November 2015