EMIR - Clearing - ESMA to consider the temporary exemption for PSA* can be lifted


Introduced with EMIR (648/2012) and renewed with EMIR Refit (2019/384), the clearing exemption granted to pension schemes arrangements was justified by the lack of an appropriate technical solution from CCPs**, solutions for non-cash hedging of variation margins.

Under EMIR Refit, ESMA must provide the European Commission (EC) with an annual report on both the existence of viable technical solutions and the use of derivatives by pension schemes, the consequences of a clearing obligation, ... The regulator’s findings are used by the EC to rule on a possible extension of the exemption.

While ESMA has so far been in favour of maintaining the temporary exemption, the European regulator, in its letter of 25 January 2022, opens the door to the implementation of the clearing obligation. The analysis conducted by the latter shows that there are technical solutions and that pension schemes are operationally ready. However, the introduction of a compensation obligation takes time to deploy. As a result, ESMA also suggests that the exemption be extended until June 19, 2023, this additional year to be used for compliance.

*PSA: Pension Scheme Arrangement
**CCP: Central Counterparty