The European Commission (EC) has proposed an easing of clearing and collateral requirements for smaller buy-side firms, as well as changes to implementing stricter capital rules for banks.
The EC published its review of the European Market Infrastructure Regulation (EMIR) conceding there should be a review of the clearing and margining requirements for non-financial companies, pension funds and smaller financial institutions.
The review comes after the European Securities and Markets Authority (ESMA) recommended a further two year delay of the clearing mandate for pension funds.
Most notably for the banking industry is the EC’s decision to ease implementation of the leverage ratio by proposing an offset for client collateral when calculating exposures for clearing banks.
The primary concern for clearing banks is how the Basel III leverage ratio framework treats collateral, in which client segregated margin is treated as part of the total leverage ratio calculation, requiring more capital from banks.
“The primary concern for clearing banks is how the Basel III framework treats collateral, in which client segregated margin is treated as part of the total leverage ratio calculation, requiring more capital from banks,” said Walt Lukken, president and CEO of the Futures Industry Association (FIA).
“We’re looking forward to reviewing this proposal in more detail and considering its impact on the listed and cleared derivatives industry.”
The EC has also proposed a new framework allowing additional time for recognising qualifying central counterparties (QCCPs), a new method for calculating the exposure value of derivatives transactions, and changes to the capitalisation exposures for CCPs.
“Today, we have put forward new risk reduction proposals that build on the agreed global standards while taking into account the specificities of the European banking sector,” stated Valdis Dombrovskis, the EC’s vice president for financial stability, financial services and capital markets union.