European Securities and Markets Authority Issues Public Statement on Use of Collateral by Non-Financial Counterparties Acting as Clearing Members

The European Securities and Markets Authority has published a public statement on deprioritizing supervisory actions linked to the eligibility of uncollateralised public guarantees, public bank guarantees, and commercial bank guarantees for Non-Financial Counterparties acting as clearing members, pending the entry into force of the latest revisions to the European Market Infrastructure Regulation, known as EMIR 3. We discuss EMIR 3, which is anticipated to enter into force in Q4 2024, in our note "EMIR 3 and Clearing in the EU".

The agreed EMIR 3 text includes a provision in relation to the eligibility of public guarantees, public bank guarantees, or commercial bank guarantees as collateral by CCPs. This enables CCPs to accept fully uncollateralised bank guarantees to cover their initial and ongoing exposures to NFCs acting as clearing members and clients, under certain conditions. The provisions would effectively make permanent the main features of the temporary amendments to Regulation (EU) No 153/20133 regarding CCP requirements adopted during the energy crisis which expanded the eligible pool of collateral to alleviate certain liquidity concerns, in particular for NFCs. These temporary measures are due to expire on September 7, 2024. Stakeholders have expressed concerns regarding the risks of letting the emergency measures lapse, temporarily reducing the pool of eligible collateral for NFCs as clearing members, before the new provisions apply and the expansion of CCP eligible collateral for NFCs is made permanent with the entry into force of EMIR 3. Therefore, ESMA has stated that it expects NCAs not to prioritise their supervisory actions in relation to the eligibility of uncollateralised public guarantees, public bank guarantees, and commercial bank guarantees for NFCs acting as clearing members. They should generally apply their risk-based supervisory powers in their day-to-day enforcement of applicable legislation in this area in a proportionate manner.

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