ESRB response to ESMA’s final report on extending emergency measures on CCP collateral requirements

The European Systemic Risk Board (ESRB) has responded to the European Securities and Markets Authority’s (ESMA) final report on extending emergency measures related to central counterparty (CCP) collateral requirements. Please note in this context that the final report has NOT been officially published by ESMA (yet) for public viewing.
The proposal for extension follows a corresponding final report in 2022 in which the ESMA – in light of the volatility in the energy markets primarily caused by the invasion of Ukraine by Russia and in view of the subsequent liquidity issues many (non-financial) counterparties to energy derivatives were facing in terms of margin deposits – proposed to ease collateral requirements for a period of 12 months by expanding the list of securities that may be accepted by central counterparties as collateral (please see EventID 17664 in this context for more information). The final report, that is the expansion of accepted collaterals, was subsequently implemented in Commission Delegated Regulation (EU) 2022/2311. ESMA obviously now seeks to extend the measure.
In its response, the ESRB acknowledges that ESMA’s proposed extension of this measure is necessary to reduce risks to financial stability. The ESRB had previously supported the expansion of eligible collateral for CCPs, particularly for non-financial counterparties (NFCs), as a response to liquidity pressures in energy markets. However, the ESRB had also emphasized the temporary and targeted nature of this measure and the need for further safeguards. The ESRB had also expressed the importance of assessing the broader implications of developments in commodity and energy markets for CCPs‘ risk management.
While maintaining its belief that this emergency measure should be temporary, the ESRB agrees with ESMA’s proposed extension due to potentially increased volatility in energy markets in the upcoming winter and the continuous scrutiny of EMIR 3.0 which is expected to overhaul the regulatory CCP framework altogether.