We wrote earlier this year on the temporary exemption from the EMIR central clearing obligation for entities operating pension scheme arrangements (PSAs) in relation to certain types of OTC derivatives. This exemption has been extended several times since 2012 and was due to expire on 18 June 2022. In February 2022, ESMA wrote to the European Commission recommending that it end the exemption, on the basis that PSAs are largely operationally ready.
On 9 June 2022, the Commission published its third report on clearing solutions for PSAs under EMIR. The report states that participants in the relevant expert group confirm that PSAs are largely ready to clear, but that the issue of access to cash remains.
The Commission believes that further operational steps are needed. In particular, EU central counterparties (CCPs) must further develop their facilitated access and collateral transformation models to increase their attractiveness to PSAs. Pension funds should ensure they possess sufficient organisational competences and capacities to handle clearing of their derivative portfolios.
For these reasons, the Commission has decided to extend the temporary clearing exemption for PSAs for a final year. From 19 June 2023, PSAs will be required under EMIR to clear.
The EC has also published a related Delegated Regulation, which will come into force the day after it is published in the Official Journal of the EU.
The further extension of the exemption, giving the market further time to adjust, is a welcome development.