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.