September 5, 2016

The European Uncleared Margin Rules (May) Not Be Ready Until Late April or Worse

The European regulatory process is a flowchart with many options and possible loops, the arrival of the regulations for uncleared OTC business. Follow this timeline and see when you think they will be published and fully effective.

Following on from our update on the timing of the global uncleared margin regulations here, with the help of Peter at Unicredit, we now have a detailed diagram covering the process to arrive at a 'live' regulation in Europe. In summary:

  • On September 8th, the European Supervisory Authorities (ESMA, EIOPA, EBA) are to submit revised technical standards (RTS) to the European Commission (EC)
  • The European Commission then has a maximum of three months to review the new RTS, but this period could be shorter
  • During the review the European Commission can either adopt the new RTS unchanged, or modify them
  • The process then splits
    1. An un-modified RTS then goes to the European Council and Parliament for acceptance who have one month to 'object'
    2. The modified RTS then goes to the European Council and Parliament for acceptance who have three months to 'object'
  • In each case the Council or Parliament could object to the RTS and send them back to the European Commission or European Supervisory Authorities and this process would start all over again
  • If neither the Council or Parliament object Then
  • The RTS apply on whichever is later
    • March 1st 2017, or
    • One month after they enter into force

From Now Until RTS Effective in Europe

Download a PDF Version here (or attached below)

The 5 Year Plan for Uncleared Margin Rules, Globally

Taking the European timeline into account, the expectations are that VM will apply to all firms globally from the spring of 2017, with IM being phased in on an annual basis depending on the average size of your OTC portfolio. Once we get past the European process, it is reasonable to expect that Singapore, Australia and Hong Kong will reactivate their own compliance timelines and remain in-sync with the rest of the world.  According to reports the tier 1 banks in the US and Japan didn't have an easy time of the September 1st deadline, coverage here amongst others. 



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