Three of Europe’s biggest regulatory bodies have rejected proposed amendments to the final draft Regulatory Technical Standards (RTS) on risk mitigation techniques for OTC derivatives not cleared by a CCP.
The three European Supervisory Authorities (ESAs) revealed their disagreement with the European Commission (EC) communication issued on 28 July.
The three ESAs are comprised of the European Banking Authority (EBA), European Insurance and Occupational Pensions Authority (EIOPA) and the European Security and Markets Authority (ESMA.)
Their reasons for this rejection centre around the EC’s proposal to remove concentration limits on initial margin for pension schemes on the grounds that this may leave pension funds and their counterparties at risk.
The ESAs also maintain that, with reference to covered bonds, conditions listed in the EC’s guidelines would lead to ranking of derivatives counterparties after bond holders, in contrary to regulations outlined in EMIR regulations and that more clarity should be brought to the application of the RTS to transactions concluded with third party and non financial counterparties.
The final draft of the RTS were submitted by the ESAs on 8 March this year, and the EC notified the ESAs of a delay in the endorsement process on 9 June before the EC listed amendments to the RTS were published on 28 July.
ESAs reject non-centrally cleared OTC amendments
European regulators disagree with standards laid out by the European Commission on mitigation for non-cleared OTC derivatives.