EMIR Refit: the Good, the Bad and the Ugly
Authored by – Synechron EMIR team
Synechron EMIR team
As a response to the financial crisis, the European Union (EU) adopted the European Markets Infrastructure Regulation (EMIR) in 2012 to address shortcomings in the functioning of derivatives markets. The main objective of EMIR is to reduce systemic risk by increasing the transparency of the derivatives markets and to mitigate counterparty risk by requiring OTC derivatives contracts to be cleared through Central Counterparties.
The European Commission has recently carried out an assessment of EMIR as part of their broader Regulatory Fitness and performance (REFIT) programme. It is very hard to find someone who genuinely disagrees with the aim of REFIT: to make EU laws simpler and less costly. REFIT should make sure that “EU laws deliver their intended benefits for citizens, businesses and society while removing red tape and lowering costs”. In this article we assess to what extent the Commission delivered on this intention for EMIR REFIT by addressing the most important changes1 . Spoiler: they disappointed and, in some areas, made things worse.
Is it all that bad? Certainly not, in some cases onerous requirements in the original EMIR text with unintended consequences were removed under EMIR REFIT. In other cases, useful amendments were added. We have listed some of the more important, mostly positive changes of EMIR REFIT below.