On 4 May 2020, the European Supervisory Authorities (ESAs) published joint draft Regulatory Technical Standards (RTS) to amend the Delegated Regulation on the risk mitigation techniques for non-centrally cleared over-the-counter derivatives (bilateral margining), under the European Markets Infrastructure Regulation, to incorporate a one-year deferral of the two implementation phases of the bilateral margining requirements.

On 3 April 2020, the Basel Committee on Banking Supervision (Basel Committee) and the International Organisation of Securities Commissions (IOSCO) announced their agreement to defer by one year, the deadline for completing the final two implementation phases of the bilateral margin requirements, in order to provide additional operational capacity for counterparties to respond to the COVID-19 pandemic.

The ESA’s draft RTS set out the changes to the Delegated Regulation on bilateral margining to incorporate in the EU regulatory framework the one year deferral agreed by the Basel Committee and IOSCO.

The changes would result in covered counterparties with an aggregate average notional amount of non-centrally cleared derivatives above €50 billion becoming subject to the requirement to exchange initial margin from 1 September 2021, while covered counterparties with an aggregate average notional amount of non-centrally cleared derivatives above €8 billion becoming subject to the requirement from 1 September 2022.

The ESAs have submitted the draft RTS to the European Commission for endorsement in the form of a Commission Delegated Regulation, i.e. a legally binding instrument applicable in all Member States of the European Union. Following the endorsement, they are then subject to non-objection by the European Parliament and the Council.