Date: 2019-04-10Category: Not ApplicableState: Union GovernmentCountry: Europe
Commission Delegated Regulation (EU) 2019/564 of 28 March 2019 amending Delegated Regulation (EU) 2016/2251 supplementing Regulation (EU) No 648/2012 of the European Parliament and of the Council as regards the date until which counterparties may continue to apply their risk-management procedures for certain OTC derivative contracts not cleared by a CCP (Text with EEA relevance.)
Executive Summary:
Commission Delegated Regulation (EU) 2019/564 amends Delegated Regulation (EU) 2016/2251 regarding risk management procedures for certain OTC derivative contracts not cleared by a CCP, considering the UK's withdrawal from the EU. Counterparties may continue applying existing risk management procedures under specific conditions, particularly concerning contracts novated due to the UK's withdrawal. The regulation takes effect the day after publication in the Official Journal, with application dependent on the date the Treaties cease to apply to the UK, but may not apply if a withdrawal agreement is in place, or the Article 50 period is extended past 31 December 2019.
Key Points / Main Content:
* **Amendment Overview:**
* Regulation (EU) 2019/564 amends Regulation (EU) 2016/2251 regarding risk management procedures for OTC derivative contracts not cleared by a CCP.
* **Transitional Provisions:**
* Counterparties can continue using existing risk management procedures for non-centrally cleared OTC derivative contracts entered into or novated between 16 August 2012 and the relevant application dates of Regulation (EU) 2016/2251.
* Counterparties may continue to apply risk-management procedures in place at 14 March 2019 under the following conditions:
* The non-centrally cleared OTC derivative contracts were entered into or novated before the application dates of Regulation (EU) 2016/2251 or 11 April 2019, whichever is earlier.
* The non-centrally cleared OTC derivative contracts are novated solely to replace a UK-established counterparty with one in a Member State.
* The non-centrally cleared OTC derivative contracts are novated between the date Union law ceases to apply to the UK and either the relevant application dates of Articles 36, 37, and 38 of Regulation (EU) 2016/2251, or 12 months from the date Union law ceases to apply to the UK, whichever is later.
* **Entry into Force and Application:**
* The Regulation enters into force the day after its publication in the Official Journal of the European Union.
* It applies from the date the Treaties cease to apply to the United Kingdom.
* The Regulation does not apply if:
* A withdrawal agreement with the UK has entered into force.
* A decision is made to extend the Article 50 period beyond 31 December 2019.
Impact Analysis:
* **Counterparties to OTC Derivative Contracts:**
* Impact: May continue to apply existing risk management procedures under specific conditions related to contract dates and novation due to the UK's withdrawal.
* Action Required: Assess current OTC derivative contract portfolio to determine eligibility for transitional provisions, particularly regarding contracts with UK counterparties and those potentially requiring novation.
* **European Banking Authority, European Insurance and Occupational Pensions Authority, and European Securities and Markets Authority:**
* Impact: Provided the draft regulatory technical standards to the Commission, and have analyzed the potential related costs and benefits.
* Action Required: No open public consultation was conducted. Ensure efficient solutions are implemented by market participants as quickly as possible.
* **EU Member States:**
* Impact: The regulation is binding and directly applicable in all Member States.
* Action Required: Ensure national regulations are consistent with this EU regulation.
Key Entities Referenced
European Union: A political and economic union of member states located primarily in Europe.
European Commission: An institution of the European Union, responsible for proposing legislation, implementing decisions, upholding the EU treaties and managing the day-to-day business of the EU.
United Kingdom: A country that was formerly a member state of the European Union, and its withdrawal from the Union is a central issue in this document.
Treaty on European Union: One of the primary treaties forming the constitutional basis of the European Union.
Regulation EU No 648/2012: A regulation of the European Parliament and of the Council on OTC derivatives, central counterparties and trade repositories.
Commission Delegated Regulation EU 2016/2251: A delegated regulation supplementing Regulation EU No 648/2012, concerning risk-mitigation techniques for OTC derivative contracts not cleared by a central counterparty.
Commission Delegated Regulation EU 2019/564: A delegated regulation amending Delegated Regulation EU 2016/2251 as regards the date until which counterparties may continue to apply their risk-management procedures for certain OTC derivative contracts not cleared by a CCP.
European Banking Authority: A European Supervisory Authority. It is an EU agency tasked with ensuring effective and consistent prudential regulation and supervision across the European banking sector.
10.4.2019 EN Official Journal of the European Union L 99/3
REGULATIONS
COMMISSION DELEGATED REGULATION (EU) 2019/564
of 28 March 2019
amending Delegated Regulation (EU) 2016/2251 supplementing Regulation (EU) No 648/2012 of
the European Parliament and of the Council as regards the date until which counterparties may
continue to apply their risk-management procedures for certain OTC derivative contracts not
cleared by a CCP
(Text with EEA relevance)
THE EUROPEAN COMMISSION,
Having regard to the Treaty on the Functioning of the European Union,
Having regard to Regulation (EU) No 648/2012 of the European Parliament and of the Council of 4 July 2012 on OTC
derivatives, central counterparties and trade repositories (1), and in particular Article 11(15) thereof,
Whereas:
(1) On 29 March 2017, the United Kingdom submitted the notification of its intention to withdraw from the Union
pursuant to Article 50 of the Treaty on European Union. The Treaties will cease to apply to the United Kingdom
from the date of entry into force of a withdrawal agreement, or failing that, two years after that notification,
unless the European Council, in agreement with the United Kingdom, unanimously decides to extend that period.
(2) Commission Delegated Regulation (EU) 2019/397 (2) provides for an amendment to Commission Delegated
Regulation (EU) 2016/2251 (3) as regards the date until which counterparties may continue to apply their risk-
management procedures for certain OTC derivative contracts not cleared by a CCP. Pursuant to Article 2 of
Delegated Regulation (EU) 2019/397, that Regulation is to apply from the date following that on which the
Treaties cease to apply to and in the United Kingdom pursuant to Article 50(3) of the Treaty on European Union,
unless a withdrawal has entered into force by that date or the two-year period referred to in Article 50(3) of the
Treaty on European Union has been extended.
(3) By letter of 20 March 2019, the United Kingdom submitted a request for an extension of the period provided for
in Article 50(3) of the Treaty on European Union until 30 June 2019, with a view to finalising the ratification of
the Withdrawal Agreement (4). On 21 March 2019, the European Council agreed to an extension until 22 May
2019, provided the Withdrawal Agreement is approved by the House of Commons in the following week. If that
is not the case, the European Council agreed to an extension until 12 April 2019. Consequently, Delegated
Regulation (EU) 2019/397 will not apply.
(4) However, the reasons underlying Delegated Regulation (EU) 2019/397 will remain, regardless of any extension of
the period referred to in Article 50(3) of the Treaty on European Union. In particular, the risks to the smooth
functioning of the market and a level playing field between counterparties established in the Union will persist in
the case of the United Kingdom's withdrawal from the Union without an agreement after the extended period.
Those risks are expected to remain for the foreseeable future.
(1) OJ L 201, 27.7.2012, p. 1.
(2) Commission Delegated Regulation (EU) 2019/397 of 19 December 2018 amending Delegated Regulation (EU) 2016/2251 supple
menting Regulation (EU) No 648/2012 of the European Parliament and of the Council as regards the date until which counterparties
may continue to apply their risk-management procedures for certain OTC derivative contracts not cleared by a CCP (OJ L 71, 13.3.2019,
p. 15).
(3) Commission Delegated Regulation (EU) 2016/2251 of 4 October 2016 supplementing Regulation (EU) No 648/2012 of the European
Parliament and of the Council on OTC derivatives, central counterparties and trade repositories with regard to regulatory technical
standards for risk-mitigation techniques for OTC derivative contracts not cleared by a central counterparty (OJ L 340, 15.12.2016, p. 9).
(4) Agreement on the withdrawal of the United Kingdom of Great Britain and Northern Ireland from the European Union and the European
Atomic Energy Community (OJ C 66 I, 19.2.2019, p. 1).L 99/4 EN Official Journal of the European Union 10.4.2019
(5) Delegated Regulation (EU) 2016/2251 should therefore be amended accordingly.
(6) This Regulation is based on the draft regulatory technical standards submitted by the European Banking
Authority, the European Insurance and Occupational Pensions Authority and the European Securities and
Markets Authority to the Commission.
(7) It is necessary to facilitate the implementation of efficient solutions by market participants as quickly as possible.
Therefore, the European Banking Authority, the European Insurance and Occupational Pensions Authority and
the European Securities and Markets Authority have analysed the potential related costs and benefits but have not
conducted any open public consultation in accordance with the second subparagraph of Article 10(1) of
Regulation (EU) No 1093/2010 of the European Parliament and of the Council (5), the second subparagraph of
Article 10(1) of Regulation (EU) No 1094/2010 of the European Parliament and of the Council (6) and the
second subparagraph of Article 10(1) of Regulation (EU) No 1095/2010 of the European Parliament and of the
Council (7). For the same reason, this Regulation should enter into force on the day following that of its
publication,
HAS ADOPTED THIS REGULATION:
Article 1
Article 35 of Delegated Regulation (EU) 2016/2251 is replaced by the following:
‘Article 35
Transitional provisions
1. Counterparties referred to in Article 11(3) of Regulation (EU) No 648/2012 may continue to apply the risk-
management procedures that they have in place at the date of application of this Regulation in respect of non-
centrally cleared OTC derivative contracts entered into or novated between 16 August 2012 and the relevant dates
of application of this Regulation.
2. Counterparties referred to in Article 11(3) of Regulation (EU) No 648/2012 may also continue to apply the
risk-management procedures that they have in place at 14 March 2019 in respect of non-centrally cleared OTC
derivative contracts fulfilling all of the following conditions:
(a) the non-centrally cleared OTC derivative contracts have been entered into or novated before either the relevant
dates of application of this Regulation as set out in Articles 36, 37 and 38 of this Regulation or 11 April 2019
whichever is earlier;
(b) the non-centrally cleared OTC derivative contracts are novated for the sole purpose of replacing a counterparty
established in the United Kingdom with a counterparty established in a Member State;
(c) the non-centrally cleared OTC derivative contracts are novated between the date following that on which Union
law ceases to apply to and in the United Kingdom pursuant to Article 50(3) of the Treaty on European Union
and either of the following, whichever is later:
(i) the relevant dates of application set out in Articles 36, 37 and 38 of this Regulation; or
(ii) 12 months from the date following that on which Union law ceases to apply to and in the United Kingdom
pursuant to Article 50(3) of the Treaty on European Union.’.
Article 2
This Regulation shall enter into force on the day following that of its publication in the Official Journal of the European
Union.
It shall apply from the date following that on which the Treaties cease to apply to and in the United Kingdom pursuant
to Article 50(3) of the Treaty on European Union.
(5) Regulation (EU) No 1093/2010 of the European Parliament and of the Council of 24 November 2010 establishing a European
Supervisory Authority (European Banking Authority), amending Decision No 716/2009/EC and repealing Commission Decision
2009/78/EC (OJ L 331, 15.12.2010, p. 12).
(6) Regulation (EU) No 1094/2010 of the European Parliament and of the Council of 24 November 2010 establishing a European
Supervisory Authority (European Insurance and Occupational Pensions Authority), amending Decision No 716/2009/EC and repealing
Commission Decision 2009/79/EC (OJ L 331, 15.12.2010, p. 48).
(7) Regulation (EU) No 1095/2010 of the European Parliament and of the Council of 24 November 2010 establishing a European
Supervisory Authority (European Securities and Markets Authority), amending Decision No 716/2009/EC and repealing Commission
Decision 2009/77/EC (OJ L 331, 15.12.2010, p. 84).10.4.2019 EN Official Journal of the European Union L 99/5
However, this Regulation shall not apply in either of the following cases:
(a) a withdrawal agreement concluded with the United Kingdom in accordance with Article 50(2) of the Treaty on
European Union has entered into force by the date referred to in the second paragraph of this Article;
(b) a decision has been taken to extend the two-year period referred to in Article 50(3) of the Treaty on European
Union beyond 31 December 2019.
This Regulation shall be binding in its entirety and directly applicable in all Member States.
Done at Brussels, 28 March 2019.
For the Commission
The President
Jean-Claude JUNCKER