European Commission asks ESMA to temporarily adjust collateral requirements for CCPs

Response to the current level of margins and of excessive volatility in energy derivatives markets

In a letter to the European Securities and Markets Authority (ESMA), John Berrigan from the Directorate-General for Financial Stability, Financial Services and Capital Markets Union in the European Commission asked Verena Ross, ESMA chair, to urgently consider temporary amendments to Commission Delegated Regulation (EU) No 153/2013 that would facilitate the provision of collateral by non-financial counterparties active on gas and electricity regulated markets cleared in EU-based CCPs by:

  1. Expanding the list of eligible collateral considering, for example, the temporary inclusion of, amongst other assets, EU bonds, carbon emission allowances, commercial papers and/or any other type of collateral you may find appropriate given the typical balance sheet of energy companies;
  2. Reviewing the framework applicable to bank and central bank guarantees to allow for an easier and greater issuance and usage of this type of collateral;
  3. Reviewing, where appropriate, the requirements on margins and default fund contributions (e.g. antiprocyclicality requirements, transparency, predictability, frequency of margin calls…);
  4. Proposing any other amendment you may find relevant;
  5. Additionally, given the increase in energy prices in 2022, confirm the appropriateness or otherwise of the recommendation1 to increase the clearing threshold for commodities and other derivatives in Commission Delegated Regulation (EU) No 149/2013 to EUR 4bn.

The full letter is available at https://www.esma.europa.eu/sites/default/files/library/jb-letter_to_esma_-_energy_derivatives.pdf

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