Industry Bodies Call for Extended Intra-Group Clearing Relief

ISDA and five other trade bodies (the European Association of Co-operative Banks, the European Banking Federation, Futures Industry Association, the Global Financial Markets Association and the Nordic Securities Association) has written to the European Commission and European Supervisory Authorities to request they extend the current temporary derogations, due to expire on June 30 2022, from clearing and margining requirements for intra-group transactions where at least one group entity is in a non-EU jurisdiction.

While the European Market Infrastructure Regulation (EMIR) provides for an exemption from clearing or margin requirements (the latter in classes of derivatives that are not subject to a clearing obligation) for intra-group transactions, trades between group entities where at least one group entity is in a non-EU jurisdiction do not meet the definition of intra-group transaction for this exemption unless the non-EU jurisdiction in question has been found equivalent under EMIR article 13.

To date, eight such equivalence decisions, covering agencies in seven non-EU jurisdictions, have been adopted for rules governing bilateral, non-cleared derivatives transactions, however, no article 13 equivalence decisions for the clearing obligation have been adopted.

The associations say that intra-group transactions are crucial for the ability of EU financial and non-financial groups to operate, compete (with other comparable groups) and make capital available in non-EU jurisdictions, and manage risks on a centralized basis.

They add they are also vital to enable non-EU financial and non-financial groups to provide the capital needed to underpin investment within the EU 27, and to manage risks associated with this activity. “The application of clearing and margin requirements would have a significant impact in operational and collateral terms on EU firms operating globally and non-EU firms investing in the EU,” the associations say.