Beyond August - Pension Scheme Arrangements and EMIR

The EMIR clearing requirements will apply to pension scheme arrangements (“PSAs”) from 17 August 2018, once the existing exemption for PSAs expires.

However, on 3 July 2018, ESMA issued a communication (here) to the effect that it expects competent authorities (including the Central Bank of Ireland) not to prioritise their supervisory actions towards PSAs that do not start clearing their OTC derivative contracts on 17 August (the “Communication”). 

To date, PSAs have benefited from a temporary exemption from the clearing obligation to allow central counterparties time to develop a suitable technical solution for the transfer of non-cash collateral as variation margins, as set out in our previous briefing (here). However, that exemption is set to expire on 16 August 2018 and EMIR does not provide for a further extension.

In May 2017, the European Commission published a proposal to amend EMIR, which includes a further extension of the temporary exemption from clearing for PSAs. As set out in our previous briefing (here) this proposal is still going through the legislative process, meaning that it will not be adopted by the time the existing exemption for PSAs expires.

As a result, PSAs are legally required to commence clearing on 17 August, but are likely to become exempt from the clearing requirement shortly thereafter.  It is for this reason that ESMA has issued the Communication.

This document has been prepared by McCann FitzGerald LLP for general guidance only and should not be regarded as a substitute for professional advice. Such advice should always be taken before acting on any of the matters discussed.