What does the EMIR REFIT mean for treasurers and how can they benefit – while remaining compliant with all the requirements of the regulation?
When the European Market Infrastructure Regulation (EMIR) Regulatory Fitness and Performance (REFIT) was approved and adopted, treasurers thought it was excellent news and indeed it was. The major improvement was the exemption for reporting intercompany derivatives (EU regulation N° 648/2012 EMIR, revised on 20 May 2019 N° 2019/834, which was published in the Official Journal of the European Union and which came into force on 17 June 2019). This means that when two entities belong to the same group or have the same parent company, at least one of which is a non-financial company (NFC), they are no longer obliged to report intragroup derivative transactions.
In order to obtain the full benefits of this reform, treasurers need to apply for an exemption to their domestic Supervisory Authority and potentially to all other Supervisory Authorities, when they report on behalf of their affiliates. For example, if the group treasury centre is located in Germany, it needs an exemption from the German Federal Financial Supervisory Authority (BAFIN) and should apply according to the procedure defined by that Supervisory Authority (if one has been defined). It should also apply for similar exemptions to all other Supervisory Authorities in the countries where its affiliates are located, if it reports on their behalf.
Best in class exemption process
While the basic EMIR requirements remained unchanged, the REFIT aims to remove the burden of disproportionate and overly complex regulations from non-financial counterparties, small financial counterparties and pension funds.