ESMA final draft RTS on eligibility of guarantees as CCP collateral and on aspects of CCP investment policy

The European Securities and Markets Authority (ESMA) has published a final report containing final draft regulatory technical standards (RTS) amending Commission Delegated Regulation (EU) No 153/2013 to reflect changes specified under the revised European Market Infrastructure Regulation (EMIR 3). EMIR 3 amended Article 46 of EMIR to permanently broaden both the type of eligible guarantees and the scope of who may use them. The final draft RTS specify the conditions under which public guarantees, public bank guarantees and commercial bank guarantees may be accepted as collateral, including appropriate concentration limits, credit quality requirements and stringent wrong-way risk requirements for public bank guarantees and commercial bank guarantees.

In addition, while EMIR 3 does not amend Article 47 of EMIR on investment policy, ESMA is also proposing targeted changes to the central counterparty (CCP) investment policy set out under Delegated Regulation (EU) No 153/2013. The targeted changes concern: (i) the conditions under which debt instruments can be considered highly liquid, bearing minimal credit and market risk and hence can be considered as eligible financial instruments for the purpose of CCP investment policy; and (ii) the highly secured arrangements in which financial instruments posted as margins or as default fund contributions can be deposited. The RTS were consulted on in February. ESMA will submit the final report and draft RTS to the European Commission, which has three months to decide whether to adopt them. Following their adoption, the RTS are then subject to non-objection by the European Parliament and the Council of the EU.

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