EMIR: ESAs publish final draft RTS on margin requirements for non-centrally cleared derivatives

The European Supervisory Authorities (ESAs), comprising the European Banking Authority (EBA), the European Insurance and Occupational Pensions Authority (EIOPA) and the European Securities and Markets Authority (ESMA), have published final draft regulatory technical standards (RTS) on margin requirements for non-centrally cleared derivatives under the European Market Infrastructure Regulation (EMIR).

The draft RTS cover risk mitigation techniques related to the exchange of collateral to cover exposures arising from non-centrally cleared over-the-counter (OTC) derivatives. They also specify the criteria concerning intragroup exemptions and the definitions of practical and legal impediments to the prompt transfer of funds between counterparties.

The draft RTS set out:

• the requirement that counterparties have to exchange both initial and variation margins for OTC derivatives not cleared by a central counterparty (CCP);
   
• a list of eligible collateral for the exchange of margins, the criteria to ensure the collateral is sufficiently diversified and not subject to wrong-way risk, as well as methods to determine appropriate collateral haircuts;
   
• the operational procedures related to documentation, legal assessments of the enforceability of the agreements and the timing of the collateral exchange; and
   
• the procedures for counterparties and competent authorities related to the treatment of intragroup derivative contracts.