knowledge 3 October 2022 |

Final Extension for the Pension Schemes’ Clearing Exemption

Pension scheme arrangements (“PSAs”) have been relying on time-limited exemptions from the EMIR clearing obligation since it was first introduced.  The current exemption, extended in 2021 for the first of two possible one-year extensions, expires on 18 June 2022.  On 25 January 2022 the European Securities and Markets Authority recommended to the European Commission (“EC”) a final extension of that exemption, with the clearing obligation applying to PSAs in full from 19 June 2023 (see our earlier briefing on that recommendation here, with earlier briefings accessible through that).  The EC published a regulation to effect that final extension.  The regulation provides that it:

• should enter into force as a matter of urgency, to ensure that  the  transitional period is extended before it expires; and

• will enter into force on the day following that of its publication in the Official Journal of the European Union. 

Article 85(2) of EMIR requires that, until the final extension, the EC prepares annual reports assessing whether viable technical solutions have been developed for the transfer by pension scheme arrangements of cash and non-cash collateral as variation margin and the need for measures to facilitate their uptake.  The EC has published its final report to the European Parliament and the Council under Article 85(2).  That report concludes that, whereas there has been substantial progress towards central clearing for PSAs since 2019, including some PSAs partially moving to central clearing on a voluntary basis, further operational steps are needed.  The EC recommends in the report that:

• EU central clearing parties use the time afforded by this final one-year extension to further develop their facilitated access and collateral transformation models to increase their attractiveness to PSAs, particularly smaller PSAs, which the EC notes seem currently to be more reluctant to clear; and

• PSAs ensure that they possess sufficient organisational competences and capacities to handle clearing of their derivative portfolios.

It should be noted that ESMA issued a regulatory forbearance statement (dated 16 June 2022) confirming that from 19 June 2022 and until the approval process of the regulation has been completed, ESMA expects competent authorities not to prioritise their supervisory actions in relation to the clearing obligation for PSAs.

Update: On 30 September 2022, delegated regulation (EU) 2022/1671 of 9 June 2022 (here) was published in the Official Journal. This delegated regulation entered into force on 1 October 2022 and extends the clearing exemption for PSAs by a further year until 18 June 2023.