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ARTICLE · 12 FEBRUARY 2018

EMIR: Levelling Margin Requirements For Foreign Exchange Forwards

KPMG Luxembourg
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Effective since August 2012, the European Market Infrastructure Regulation (EMIR) and its various technical standards, notably Commission Delegated Regulation (EU) 2016/2251 ...

European UnionFinance and Banking
Sven Muehlenbrock
Sven Muehlenbrock
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Effective since August 2012, the European Market Infrastructure Regulation (EMIR) and its various technical standards, notably Commission Delegated Regulation (EU) 2016/2251 regarding collateral requirements, have led to some challenges for European entities participating in the derivatives market. One of these challenges, however, will likely soon be attenuated.

Physically settled foreign exchange (FX) forwards are widely used, especially to hedge FX risk. Under EMIR, all financial counterparties and specific non-financial counterparties trading this kind of product should exchange variation margins as of 3 January 2018. Many non-EU jurisdictions, however, have limited the scope of application of variation margins. Especially for EU institutions trading with non-EU counterparties, this could lead to a competitive disadvantage.

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