Risk hedging: adjustments of EMIR are necessary

The revision of the European Market Infrastructure Regulation (EMIR) has been discussed in trialogue between the European Commission, the European Parliament and the Council. The positions of the three institutions consider important claims of the real economy. However, there are some points not yet properly being addressed in the trialogue.

The current state of negotiations indicates some practical relief for business concerning risk hedging between non-financial corporations (NFC) and financial institutions. Reporting obligations are supposed to be single-sided and the liability is related to the financial company, and not as previously proposed to both sides. In addition, intragroup transactions of NFC are exempted. Special purpose vehicles for securitization instruments are now classified as NFC. These development ensure efficient and easily applicable approaches for the real economy, especially small and medium-sized enterprises (SME).

BDI’s position on clearing thresholds is also endorsed in the trialogue. NFCs are now exempted from clearing executed by a central counterparty (CCP), if they are below the threshold. NFCs exceeding the threshold for a certain asset class are committed to clear the derivatives of this asset class.

In contrast, entrusting the European Securities and Markets Authority (ESMA) with a permanent quantitative and quality-based supervision and potential adjustment of the clearing thresholds, remains problematic. Constant adjustments create both legal and economic uncertainty. Increasing the threshold would directly lead to increasing costs and would reduce risk hedging, in particular of SMEs and midcaps. BDI and other federations representing the real economy have put forward a proposal on this issue in the trialogue process.

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