EMIR (European Market Infrastructure Regulation) – Regulation 648/2012
We provided an update on the European Market Infrastructure Regulations (EMIR) in our Summer Pensions Update. EMIR is an EU regulation which affects schemes using derivatives (including those which use them solely for hedging through their custodian). These regulations require certain over-the-counter (OTC) derivatives contracts to be cleared centrally. Pension schemes were given a three-year exemption from the OTC central clearing requirement, which was due to expire in August of this year, due to the need to provide significant amounts of cash collateral in order to meet margin calls – an inefficient way of holding assets. However, the European Commission has acknowledged the difficulties the EMIR regime causes for pension scheme trustees and has extended the exemption by a further two years to 15 August 2017.
Trustees operating hedges or using derivatives held directly for liabilities driven investments purposes should continue to work with advisors to ensure their compliance with the full EMIR regime when the exemption period ends.