This document presents amended regulatory technical standards regarding initial margin requirements for non-centrally cleared over-the-counter derivatives contracts. It proposes to extend the existing derogation for the collection of initial margins to existing contracts when one of the counterparties falls below a threshold of EUR 8 billion. These changes aim to simplify the treatment of counterparties and align…
This document is a final draft amendment of the Regulatory Technical Standards (RTS) concerning initial margin requirements applicable to over-the-counter (OTC) derivatives contracts not cleared by a central counterparty (CCP), published by the European Supervisory Authorities (ESAs) in July 2026. It amends Delegated Regulation (EU) 2016/2251 under EMIR Regulation (EU) No 648/2012. The scope covers initial margin requirements for counterparties whose aggregated average notional amount (AANA) of uncleared OTC derivatives is below the threshold of 8 billion euros, including existing and new contracts, aligning European regulation with international practices. The document comprises 18 pages and is addressed to financial actors involved in OTC derivatives risk management, notably banks, insurers, and pension funds.
The document addresses the amendment of the RTS on initial margin requirements for uncleared OTC derivatives contracts, aiming to extend the existing exemption to existing contracts when one counterparty has an AANA below 8 billion euros. This extension responds to a major operational issue: currently, only new transactions are exempt, which imposes costly maintenance of initial margins and custody relationships for ongoing contracts. The draft thus simplifies margin management by aligning European regulation with that of other jurisdictions, avoiding competitive distortions and unnecessary complexities. It proposes that the exemption may apply from June 1 of the year the threshold is observed, while reintroduction of margins in case of threshold breach remains effective January 1 of the following year, providing a preparation period. Furthermore, it updates rules related to equity and index options, now exempt under EMIR 3. Consulted stakeholders mostly supported these changes, highlighting benefits in terms of operational cost reduction, liquidity, and regulatory harmonization. The draft is submitted to the European Commission for adoption, before validation by Parliament and Council.
EMIR regulation imposes initial margin requirements for uncleared OTC derivatives to reduce systemic risks. Delegated Regulation (EU) 2016/2251 specifies these requirements, including an exemption for counterparties whose AANA is below 8 billion euros, applicable only to new contracts. This situation creates operational and financial burdens for counterparties who must maintain initial margins on existing contracts, while new contracts are exempt. Moreover, this asymmetry differs from practices in other jurisdictions, generating complexities and risks of competitive imbalance. The objective is therefore to extend this exemption to existing contracts when the threshold is crossed downward, simplifying margin management, improving liquidity, and aligning European rules with international standards. The scope covers uncleared OTC derivatives, financial counterparties and their groups, with particular attention to equity and index options, now exempt. Limitations include the absence of detailed quantified impact and the non-inclusion of a review clause in the proposed text.
Exemption from initial margin requirements:
- The exemption threshold is set at an AANA of 8 billion euros, calculated over March, April, and May of the previous year (p. 3, 4, 6).
- The exemption previously applied only to new uncleared OTC contracts concluded within the calendar year, excluding existing contracts (p. 3, 4).
- The draft extends this exemption to existing contracts when one counterparty is below the threshold, allowing release of initial margins already collected (p. 3, 4, 9).
- The exemption can be implemented from June 1 of the year the threshold is observed, accelerating reduction of operational constraints (p. 5, 9).
- If both counterparties exceed the threshold, initial margins must be applied to new contracts from January 1 of the following year, with possibility of early application (p. 5).
International alignment and harmonization:
- The AANA calculation and reference period are aligned with BCBS-IOSCO standards, ensuring international consistency (p. 5, 12).
- Extending the exemption to existing contracts harmonizes European regulation with other jurisdictions, avoiding incentives to prefer non-European counterparties (p. 4, 12).
Equity and index options:
- Following EMIR 3 (Regulation (EU) 2024/2987), single equity and equity index options not cleared are exempt from initial margin requirements (p. 6, 8).
- The draft removes obsolete transitional provisions related to these instruments in the delegated regulation (p. 6, 8).
Stakeholder consultation:
- ESAs’ stakeholder groups mostly supported the draft, emphasizing operational cost reduction, liquidity release, and process simplification (p. 11-14).
- Suggestions were made to specify orderly margin release, recognize sectoral differences, and include review and research clauses (p. 14-18).
- The ESAs justified the restricted consultation without impact assessment given the limited scope of the amendments (p. 11-12).
Sectoral differences:
- Insurers, often close to the threshold, particularly benefit from these reliefs due to their targeted derivatives use (p. 15-17).
- Banks, with larger portfolios, generally exceed the threshold and are less impacted by this exemption (p. 15-16).
- Better consideration of sectoral specificities was suggested, notably via a new recital (p. 16).
Established facts:
- Current regulation imposes initial margins on existing contracts even when a counterparty’s AANA falls below the 8 billion euro threshold, creating operational burden (p. 4).
- Other jurisdictions exempt existing contracts in this case, creating competitive imbalance (p. 4).
- The draft amendment extends the exemption to existing contracts and allows release of initial margins already collected (p. 3, 9).
- The exemption can be applied from June 1 of the year the threshold is observed, while margin reintroduction in case of breach is effective January 1 following (p. 5).
Assumptions:
- Alignment with international standards and operational simplification will improve counterparties’ competitiveness and risk management (p. 4, 12).
- Removal of transitional provisions related to equity and index options clarifies the regulatory framework (p. 6).
Interpretations:
- The measure reduces costs and complexities for counterparties close to the threshold, notably insurers (p. 15-16).
- The asymmetric application dates provide regulatory preparation flexibility (p. 5).
- The restricted consultation is deemed appropriate given the technical and limited nature of the amendments (p. 11-12).
Uncertainties:
- Precise quantitative impact on counterparties is not detailed in the document (p. 17).
- Absence of a review clause may limit future adaptation to market developments (p. 17-18).
- Questions remain on interaction with the central clearing framework (p. 14).
The ESAs recommend adopting the draft amendment of the RTS modifying Delegated Regulation (EU) 2016/2251 to extend the exemption from initial margin requirements to existing contracts when one counterparty has an AANA below 8 billion euros. This measure aims to reduce operational and financial burdens, release liquidity, and harmonize European regulation with international practices. The draft provides for early implementation from June 1 for the exemption, while retaining January 1 as the date for margin resumption in case of threshold breach. It also removes transitional provisions related to equity and index options in accordance with EMIR 3. The ESAs consulted stakeholder groups, which mostly supported these changes. The draft will be submitted to the European Commission for adoption, then to Parliament and Council for non-objection, before publication in the Official Journal of the European Union. No substantial modifications were made following consultations. The ESAs consider that the limited scope of the amendments does not justify an extended public consultation nor a detailed impact assessment.
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