Industry Urges EU to Extend Relief for Cross-Border Intragroup Transactions

On November 17, 2021, 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) wrote to the European Commission and European Supervisory Authorities to request they extend the current temporary derogations from clearing and margining requirements for intragroup 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 intragroup transactions, trades between group entities where at least one group entity is in a non-EU jurisdiction do not meet the definition of intragroup 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 derogations expire on June 30, 2022.

Intragroup 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. Intragroup transactions 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.

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