The European Supervisory Authorities Authority (ESAs) recently launched two joint consultations to amend Regulatory Technical Standards (RTS) on the clearing obligation and risk mitigation techniques for OTC derivatives not cleared.
These standards, which implement the European Market Infrastructure Regulation (EMIR), aim to amend the current regulation on the clearing obligation and risk mitigation techniques on OTC derivatives not cleared by a central counterparties (CCPs) in order to provide a specific treatment for simple, transparent and standardised (STS) securitisation and ensure a level playing field with covered bonds. The consultations run until 15 June 2018.
The Securitisation Regulation and the amended EMIR provide a specific treatment for STS Securitisation in relation to the clearing obligation and on risk mitigation techniques on non-cleared OTC derivatives frameworks.
The consultation on the draft RTS on the clearing obligation clarify which arrangements under covered bonds or securitisations adequately mitigate counterparty risk and thus may benefit from an exemption from the clearing obligation.
The consultation on the draft RTS on risk mitigation techniques aims at extending the type of special treatment currently associated with covered bonds to STS securitisations. The proposed treatment, i.e. no exchange of initial margins and collection only of variation margins, is applicable only where a STS securitisation structure meets a specific set of conditions equivalent to the ones required to covered bonds issuers to be able to benefit of that same treatment.
Comments to the consultations can be sent to EBA and ESMA respectively, online by clicking on the “send your comments” button on the consultation pages. All contributions received will be published following the close of the consultation, unless requested otherwise. Please note that the deadline for the submission of comments is 15 June 2018.
A public hearing will take place at the EBA premises on 31 May 2018, from 15.00 to 16.00 UK time.
The ESAs have developed these two CPs in accordance with Articles 4 and 11 of EMIR as amended under Article 42 of the Securitisation Regulation, which contains two mandates for the ESAs on the clearing obligation and on risk mitigation techniques for OTC derivatives not cleared.