European commissioner Jonathan Hill has held out the prospect of changes to the European Market Infrastructure Regulation (EMIR) to accommodate concerns raised by pension funds and others worried about the negative consequences of the rules on derivatives.
Speaking at a public hearing in Brussels on the Commission’s review of EU financial regulation adopted in the wake of the 2008 crisis, financial services commissioner Hill said “it should be possible to make EMIR more proportionate” while still mitigating systemic risk in derivatives markets.
“It should be possible to lower administrative reporting burdens,” he said.
The comments came after Hill noted concerns with the regulation from pension funds, as well as financial services companies and corporates.
These “all call for more proportionality” in EMIR, he said, “and point to the way it interacts with bank capital rules”.
While stressing the need to continue to work on ensuring financial stability, Hill said it was important requirements be “set accordingly”.
“At the same time,” he added, “we must make sure the cumulative impact of bank capital rules such as the leverage ratio and EMIR are not overly burdensome, that they don’t weigh too heavily on those that provide clearing services and don’t undermine sensible business planning and risk management.”
EMIR regulates over-the-counter (OTC) derivatives, central counterparties and trade repositories.
Among other obligations, it introduced a requirement for some OTC derivatives to be centrally cleared.
Many in the industry are concerned about the impact they see EMIR having on pension funds, such as higher costs, and have made arguments to this effect in submissions to Commission consultations.
The workability of the central clearing obligation for pension funds is also in question, as in principle these do not have cash to post as collateral.
Many in the industry have said they back central clearing for pension funds but that suitable mechanisms need to be developed.
APG, PGGM and Mn in the Netherlands, for example, have made this argument, as has ATP, Denmark’s largest pension fund.
The UK’s Pensions and Lifetime Savings Association, meanwhile, has called for an indefinite exemption from central clearing.
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