Final European Standards For Derivatives Collateralisation

On 8 March 2016, the three European Supervisory Authorities (ESAs)¹ published their final draft regulatory technical standards² in relation to the collateralisation of non-centrally cleared derivatives. The standards are to become binding on some counterparties as from 1 September 2016 and thereafter will be phased in for other counterparties. Apart from compulsory clearing requirements, the provisions for mandatory collateralisation of uncleared derivatives represent the biggest change to derivatives markets since the financial crisis, entailing the posting of billions of dollars worth of collateral, much of which will have to remain segregated and therefore not re-usable. The draft Regulatory Technical Standards (RTS) will, inter alia, need to be adopted by the European Commission before they can become effective, but when they do, they will affect not only EU parties engaging in uncleared OTC derivatives, but also non-EU counterparties.