EMIR Refit: Amendments to Clearing Obligation and Notification

NBB_2019_13 – 21 June 2019 Communication – Page 1/3 boulevard de Berlaimont 14 – BE-1000 Brussels tel. +32 2 221 24 33 company number: 0203.201.340 RPM Brussels www.bnb.be Communication Brussels, 21 June 2019 Reference: NBB_2019_13 your correspondent:
Rita Tam tel. +32 2 221 45 16 rita.tam@nbb.be
EMIR Refit: amendments to the clearing obligation for OTC derivative contracts Scope Belgian credit institutions, Belgian insurance and reinsurance undertakings, Belgian broker-dealers, Belgian payment institutions and Belgian clearing houses (hereinafter "the institutions"), as defined in Article 2(8) and 2(9) of European Regulation No 648/2012 of 4 July 2012 (hereinafter the "EMIR Regulation"). Summary/Objectives Following the entry into force of European Regulation 2019/834 of 20 May 2019 (hereinafter the "EMIR Refit Regulation"), this communication clarifies the procedure that institutions must follow to calculate their aggregated group-level average positions 1 to which they belong and to notify the NBB and ESMA. 1 Group as defined in Article 2(16) of the EMIR Regulation.

Communication – Page 2/3 NBB_2019_13 – 21 June 2019 Madam, Sir, The European Commission carried out an evaluation of the EMIR Regulation (EU) No 648/2012 and makes certain modifications to it, with the aim of simplifying certain aspects, while preserving the fundamental objectives of financial stability and reduction of systemic risk. EMIR Refit 2 is published on 28 May 2019 and enters into force on 17 June 2019. This regulation slightly modifies the scope of the clearing obligation applicable to counterparties concluding over-the-counter derivative contracts:
Clearing obligation (Article 4 bis EMIR)
From the entry into force of EMIR Refit, only contracts concluded or novated from the date on which the clearing obligation applies will be subject to it. Thus, the clearing obligation on contracts concluded before the entry into force of this clearing obligation (frontloading) no longer applies. Furthermore, EMIR Refit introduces the notion of 'small financial counterparty' ('small financial counterparty', hereinafter SFC), as being one whose positions in over-the-counter derivative contracts do not exceed the clearing thresholds. All counterparties, financial and non-financial, may calculate their positions to verify whether they are below the clearing thresholds and whether they benefit from the exemption from the clearing obligation. To carry out this verification, counterparties calculate an average position, based on positions aggregated at the group level to which they belong, at the end of each of the last twelve months. This average position must be compared to the following clearing thresholds:
Asset class Threshold in notional value
Credit derivatives 1 billion euros
Equity derivatives 1 billion euros
Interest rate derivatives 3 billion euros
Foreign exchange derivatives 3 billion euros
Commodity and other derivatives 3 billion euros The calculation will be carried out for the first time upon the entry into force of EMIR Refit (in June 2019) and then once a year. https://www.esma.europa.eu/sites/default/files/library/esma70-151-2181_public_statement_on_refit_implementation_of_co_regime_for_fcs_and_nfcs.pdf ESMA details the method of calculating positions relative to clearing thresholds by type of counterparty (cf. EMIR Q&As OTC Question 3):
https://www.esma.europa.eu/sites/default/files/library/esma70-1861941480-52_qa_on_emir_implementation.pdf 2 Regulation (EU) 2019/834 of the European Parliament and of the Council of 20 May 2019 amending Regulation (EU) No 648/2012. https://eur-lex.europa.eu/eli/reg/2019/834/oj

NBB_2019_13 – 21 June 2019 Communication – Page 3/3 Unlike non-financial counterparties ('non-financial counterparty', hereinafter NFC), financial counterparties ('financial counterparty', hereinafter FC) cannot exclude their hedging contracts when calculating their positions. Once it reaches the clearing threshold, an FC is subject to the clearing obligation for all classes of derivative contracts it holds, whereas an NFC is only subject to it for the derivative class(es) where this threshold is exceeded. EMIR Refit does not provide for deferred implementation of these new rules. Upon the entry into force of the text, financial and non-financial counterparties must therefore be able to carry out the necessary position calculations and immediately notify their national competent authority and ESMA if their positions exceed any of the clearing thresholds or if they do not carry out this calculation. Counterparties who do not carry out this verification are automatically subject to the clearing obligation. A counterparty (or institution), whose aggregated group position has exceeded the clearing threshold, must be able to clear its derivative contracts with a clearing house within four months following notification.

• All Belgian institutions supervised by the NBB, whose aggregated group position described above exceeds at least one of the clearing thresholds, must notify the NBB and ESMA of the breach of this threshold upon the entry into force of EMIR Refit.
• According to Articles 4 bis and 10, institutions that do not carry out the calculation of their positions must also inform the NBB and ESMA.
  For their notifications to the NBB and ESMA, counterparties must complete the form published on the ESMA website: https://www.esma.europa.eu/policy-activities/post-trading/clearing-thresholds The form is also available at www.nbb.be. Counterparties notifying the NBB must send this form to the following email address: emir@nbb.be. Please accept, Madam, Sir, my distinguished greetings. Pierre Wunsch Governor