On September 8, the European Supervisory Authorities (ESAs, consisting of the European Banking Authority, the European Insurance and Occupational Pensions Authority and the European Securities and Markets Authority) published its opinion on the European Commission’s (Commission) proposed amendments to the final draft regulatory technical standards (RTS) on risk mitigation techniques for uncleared, over-the-counter derivatives (Opinion).

The ESAs initially submitted the RTS to the Commission for approval in March 2016. In July 2016, the Commission published a letter (Letter) confirming its intention to endorse the RTS, provided certain amendments were made. Specifically, the Commission proposed clarifications to the RTS and also proposed to amend the implementation dates for the RTS. Following publication of the Letter, the ESAs had a period of six weeks to amend the RTS and resubmit it to the Commission in the form an opinion. The Opinion represents the ESAs’ response to the Letter, and the ESAs have largely rejected the Commission’s substantive amendments. In particular, the ESAs rejected the Commission’s proposed amendments to: (1) concentration limits on initial margin for pension scheme arrangements; (2) threshold calculations for non-netting jurisdictions; (3) covered bonds; (4) the treatment of bilateral derivative contracts where a counterparty is a central counterparty; (5) transactions with third-country counterparties; and (6) intragroup derivative contracts. The Opinion also sets out the ESAs’ reasoning for rejecting the Commission’s proposals, including the number of unintended consequences of the Commission’s suggested changes. Instead, the Opinion contains a further revised version of the RTS that reflects the ESAs consolidated comments.

For more information, see the Corporate & Financial Weekly Digest editions of August 12 and March 18.

The Opinion is available here.