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Intragroup OTC Derivatives Exemption

A temporary regime for intragroup OTC derivative contracts, where one counterparty is established in a third country and the other in the EU, was due to expire on 30 June 2022. Parties raised concerns about negative consequences if the deferred date of application were not extended.

On 13 June 2022, the European Supervisory Authorities (ESAs) announced the publication of final reports containing draft regulatory technical standards (RTS) and a proposal to extend the temporary exemptions regime for intragroup contracts under EMIR for three years.

The following documents outline how the temporary regime will be extended:

  • Final report containing draft RTS amending the bilateral margin requirements with regards to intragroup contracts, developed under Article 11(15) of EMIR.
  • Final report containing draft RTS on amendments to the clearing obligation regarding intragroup contracts, developed under Article 5(2) of EMIR.

The extension is designed to allow time for the ongoing assessment of third-country equivalence and for a review of the intragroup exemptions framework under the forthcoming review of EMIR.

The ESAs suggest, as had ESMA earlier this year, that additional conditions might be required for the intragroup exemption, including:

  • euro and EU currency risks must be managed by a group entity in the EEA; and
  • the third country in which the group entity is established not being considered a risk as regards anti-money laundering, nor subject to EU sanctions

The draft RTS have been sent to the European Commission for endorsement, after which they will be subject to non-objection by the European Parliament and the Council of the EU.

In order to allow time for the legislative process, the ESAs have stated that they expect competent authorities not to prioritise their supervisory actions on the related requirements applicable to intragroup transactions, but should generally apply their risk-based supervisory powers in a proportionate manner.

For further information, please contact Richard KellyWilliam FootChristian DonaghTurlough Galvin, Daniel PeartAlan KeatingVincent McConnon, Alan Bunbury or your usual Matheson contact.