On February 23, the European Supervisory Authorities (ESAs), which consist of the European Banking Authority, European Insurance and Occupational Pensions Authority, and the European Securities and Markets Authority, published a joint statement (Statement) in response to industry requests relating to operational challenges in meeting the deadline of March 1 for exchanging variation margin imposed by the European Market Infrastructure Regulation (EMIR).
The Statement acknowledges that the March 1 deadline poses a challenge for smaller counterparties. However, it goes on to state that the deadline is part of a globally agreed upon framework, known in the European Union since 2015, which had already been delayed by nine months.
The Statement further confirms that the ESAs and national competent authorities of member states possess no formal power to disapply or delay the deadline. The only way to do so would be through further EU legislation, which is not possible due to the lengthy process required.
The Statement ends with an expectation that any difficulties faced by smaller counterparties will be solved in the coming months and those transactions concluded on or after March 1 will remain subject to the obligation to exchange variation margin. In the meantime, competent authorities are expected to “generally apply their risk based supervisory powers,” assessing on a case-by-case basis the level of compliance, and progress towards compliance, of firms unable to meet the deadline.
The Statement is available here.