December 18th, 2018
The European Supervisory Authorities (ESAs) published today two joint draft Regulatory Technical Standards (RTS) to amend the RTS on the clearing obligation and risk mitigation techniques for non-cleared OTC derivatives.
These standards provide a specific treatment for simple, transparent and standardised (STS) securitisation to ensure a level playing field with covered bonds. They are required for the proper implementation of the European Market Infrastructure Regulation (EMIR) and will amend the current regulation on the clearing obligation and risk mitigation techniques on OTC derivatives not cleared by central counterparties (CCPs).
In particular, the draft RTS on risk mitigation techniques amend the existing RTS by extending the special treatment currently associated with covered bonds to STS securitisations. The treatment, which allows no exchange of initial margin and only collection of variation margin, is applicable only where a STS securitisation structure meets a specific set of conditions equivalent to the ones required for covered bonds issuers to be able to benefit from that same treatment.
Further details can be found on the ESMA’s website here.