Report on the international treatment of central banks and public entities managing public debt with regard to OTC derivatives transactions

The Regulation on OTC derivatives, central counterparties and trade repositories (EMIR) of 4 July 2012 requires, inter alia, the central clearing of all standardised OTC derivatives contracts, the reporting of all derivatives contracts to trade repositories and the implementation of risk-mitigation techniques for those trades which are not centrally cleared. According to Article 1(4) of EMIR, the Union’s central banks and Union public bodies charged with or intervening in the management of public debt are exempted from EMIR and are therefore not subject to these obligations.

Under Article 1(6) of EMIR, the European Commission is empowered to amend the list of exempted entities by way of a Delegated Act if it concludes, after analysing the international treatment of central banks and of public bodies managing public debt in other jurisdictions’ legal frameworks and informing the European Parliament and the Council of the results, that the exemption of the monetary responsibilities of those third-country central banks from the clearing and reporting obligation is necessary.

The Commission carried out its first review of the OTC derivatives legal frameworks in Japan, Switzerland, the United States, Australia, Canada, and Hong Kong in 2013. On 22 March 2013, the Commission adopted a report concluding that the legislative frameworks of Japan and the United States fulfilled the conditions for the central banks and public bodies responsible for the management of the public debt in these two jurisdictions to be exempted from certain EMIR requirements. They were subsequently added to the list of exempted entities in Article 1(4) of EMIR by way of Commission Delegated Regulation (EU) No 1002/2013.

The legislative frameworks in the four remaining jurisdictions were deemed to have been insufficiently advanced for their central banks and public debt management bodies to be included in the list of exempted entities. However, the report concluded that the Commission would "monitor and report on the latest developments" once their rules were finalised.

The current assessment includes the four jurisdictions included in the first assessment but not recommended for an exemption at that time as well as two other jurisdictions (Mexico and Singapore) which requested an assessment. The assessment is based on information gathered directly from the jurisdictions under assessment, and looks at two specific aspects of these frameworks:
i) progress in the implementation of OTC derivative market reforms as agreed at the 2009 G20 summit in Pittsburgh;
ii) the treatment of central banks and public bodies charged with or intervening in the management of the public debt within the relevant legal frameworks in these jurisdictions as well as the risk-management standards applicable to the derivative transactions entered into by these entities.

The analysis shows that significant progress has been made in all jurisdictions under assessment with regard to the adoption and implementation of OTC derivatives reforms. Moreover, all six have addressed the issue of the applicability of the various requirements to central banks and public bodies charged with or intervening in the management of public debt.