Regulatory Update

EMIR review


On 16 May the European Parliament ECON Committee voted on its final draft report on EMIR review. The report contains many positive developments for non-financial counterparties, including:


  • Shifting the reporting obligation (including full legal liability) to financial counterparties (FCs); however non-financial counterparties (NFCs) are free to continue to report themselves of they so wish

  • Exemption from reporting  intragroup transactions where at least one of the counterparties is an NFC, regardless of the place of establishment of the NFC - meaning that the exemption would apply also to intragroup transactions between an EU and a non-EU entity

  • Clearing obligation and bilateral margining obligation to be applied to NFCs only in the asset class where the clearing threshold has been exceeded

  • Variation margin requirements for physically-settled FX forwards and swaps to apply only to the most systemic counterparties (FCs) and not to NFCs

  • Extension of the current exemption from central clearing for pension fund arrangements (PSAs)


The legislative process is not however yet finalised, as now the Parliament, the member states and the Commission will move to the so-called trilogues where they will agree on a final text of the EMIR review. The trilogues could be expected to start after the Plenary of the Parliament has approved the ECON report, likely to happen in June.



Sustainable finance


In March the European Commission published its Action Plan on sustainable finance that is based on the final report of the High Level Expert Group on sustainable finance. The recommendations of the Action Plan include:

  • Establishing an EU classification system on what is sustainable 

  • Developing EU labels for green financial products, such as green bonds 

  • Ensuring that asset managers and institutional investors take sustainability into account in their investment processes 

  • Enhancing transparency in corporate reporting 


In May the European Commission adopted a package of legislative proposals implementing some aspects of the Action Plan.


Euro risk-free rate working group

The ECB has appointed a working group on risk-free euro rate. The EACT is participating in the subgroup on term rates represented by Chair Jean-Marc Servat


Money Market Funds


The European Commission has sent a letter to ESMA stating that it considers that reverse distribution mechanism (RDM) is not compatible with the MMF Regulation. RDM (also called share cancellation or share destruction) is a practice used by stable-priced funds to deal with negative yield, where units of shares are cancelled. The Commission is requesting ESMA to develop guidance on the issue in order to ensure supervisory convergence.

Prohibiting the practice of RDM is very likely to have consequences on the availability of CNAV and future LVNAV funds denominated in euro (and in other negative-yielding currencies) as it will be difficult for them to deal with negative yields in other way than by RDM.





The European Commission has published a legislative proposal on fees on cross-border payments denominated in euro. The legislation in force foresees that fees for cross-border payments in euro in Eurozone countries should be the same of the fees for domestic payments denominated in euro. The aim of the proposal is to enlarge this scope also to EU member states that are not in the Eurozone, where the fees will have to be the same for cross-border euro payment and a domestic payment of the same value in local currency. The proposal does not cover other (EU) currencies than the euro however.