Pension funds have been exempted from central clearing obligations since the European Market Infrastructure Regulation (or EMIR) went into effect in 2012. Pension funds often lack the cash needed to meet collateral obligations under EMIR due to their low liquidity needs, and funds have argued successfully that posting the required collateral in cash to CCPs would harm their businesses unfairly.
Pension schemes’ current exemption is due to expire in August this year, and
European member states recently endorsed a further extension of the exemption from central clearing for pension funds, in line with a proposal made by the European Commission last May. It remains to be seen whether this extension will be for a fixed period as before or whether it will be open ended.
To find out more about the outlook for pension funds with regards to clearing, we spoke to Caroline Escott, who is the investment and defined benefits policy lead at the Pension and Lifetime Savings Association (or PLSA) for her input on this topic. Listen to the podcast or read our interview.