Financial benchmarks play a key role in global financial markets and day-to-day activities of treasury departments of non-financial companies (NFC). They are an important part of the risk management strategies, for example to protect NFCs from exchange rate risks, commodity price risks or interest rates fluctuations. Deutsches Aktieninstitut1 therefore welcomes the initiative of the EU Commission to improve the Benchmark Regulation (BMR), on two key points: (1) the exemption of specific foreign ...
In its response to the ESMA consultation on the reporting of derivative transactions according to the EU-regulation EMIR Deutsches Aktieninstitut asks for proportionate requirements for non-financial companies. This applies especially for the delegation possibility, the reporting format and different reporting fields.
In its answer to ESMA's consultation on transparency for non-equity instruments Deutsches Aktieninstitut asks for a preservation of waivers for hedging-derivatives under MiFID. These waivers are justified as the instruments in question are not traded on secondary markets.
In its position paper regarding the MiFID-review of the European Commission Deutsches Aktieninstitut considers improvements with respect to rules concerning investor protection, transparency, research, commodity derivative markets and FX-spot transactions.
Non-financial companies, using commodity derivatives, have to notify their competent authorities that this derivative business is ancillary to their main business. Complex calculations are often the consequence. Therefore, Deutsches Aktieninstitut supports a proposal submitted by several energy associations to introduce a qualitative exemption. This would mean a significant relief for non-financial companies as calculations and notification would not be required anymore.
Deutsches Aktieninstitut welcomes the opportunity to comment on the European Commission’s Inception Impact Assessment on the review of the Benchmarks Regulation (BMR). We welcome the initiative to improve the BMR, to ensure the continued availability to EU users of third country benchmarks for which no suitable alternative exists in the Union and to improve the user-friendliness of the regime for benchmark users. Deutsches Aktieninstitut calls, among other ...
In its consultation on the position limits regime ESMA discusses, wether specific gas and power contracts should be classified as derivatives under MiFID II. This would endanger many energy provider to become a bank which would increase energy costs for the economy as a whole. Furthermore, all companies using these contracts would be burdened by higher regulatory costs.
In its answer to ESMA's call for evidence on position limits Deutsches Aktieninstitut underlines the importance of well-proved exemptions. That concerns especially the hedging exemption, i.e. that non-financial companies are not obliged to count derivatives used in their risk-management against the position limits.
In accordance with EMIR-Refit intra-group transactions where at least one counterparty is a non-financial company are exempted from the reporting obligation. The national competent authority has to be notified about the exemption. The paper sets out a proposal for a lean and workable notification procedure.
Deutsches Aktieninstitut, the Association of German Chambers of Commerce and Industry (DIHK) and Verband Deutscher Treasurer composed recommendations concerning the consequences of a Brexit without withdrawal agreement on the derivate business of EU companies. These recommendations complement the position of 7th of February 2019 on the German Brexit-StBG. With Brexit, derivative business with counterparties in the United Kingdom based on EMIR and MiFID II/MiFIR will no longer be possible. The ...
Deutsches Aktieninstitut and The Association of German Chambers of Commerce and Industry (DIHK) commented on the proposal for the German Brexit-Steuerbegleitgesetz. They welcome that the provisions include a transition period for existing and directly linked business. Yet, the regulation falls short of the needs of business. In order to avoid a negative impact on the risk hedging of nonfinancial companies, the provisions should also inlcude new derivatives business. Moreover, they point out ...
Only one year before the EU Benchmark Regulation will be fully in force, there is a high level of uncertainty among non-financial companies, which financial instruments and services referencing to benchmarks will be possible as of 1 January 2020. Deutsches Aktieninstitut, thus, calls for extending transitional periods for critical, for non-critical and for non-EU benchmarks. The latter are for example used in hedging instruments for cash flows from imports and exports.
Deutsches Aktieninstitut together with BDI, BDEW, EFET, Energy UK, Eurelectric, IOGP and VCI welcomes very much the EU Commission’s Communication of 13 November 2018 on Brexit Preparedness. Especially, they appreciate that the EU Commission states that it will soon adopt temporary equivalence decisions in order to ensure that there will be no disruption in central clearing and depositaries services. This is an important measure but they wish to raise a concern that the EU Commission’s ...
Deutsches Aktieninstitut comments on the German contingency plans for financial service providers and insurance companies. We welcome that the proposal creates legal certainty for existing contracts at the time of Brexit. The delegation of regulatory power to BaFin creates flexbility. However, the transition period is too short for insurance contracts. Moreover, the contingency plans of KWG should not only cover existing but also new business. In addition, German financial service providers ...
Non-financial companies use OTC derivatives to hedge against currency, interest rate and commodity price risks related to business operations. This position paper summarises why non-financial companies need derivatives that are not centrally cleared or collateralised for this purpose and underlines the necessacity of clearing exemptions. The paper is Deutsches Aktieninstitut's contribution to a consultation of the Financial Stability Board on the recent regulation of derivative markets.
At the start of trilogues on the risk reduction package Deutsches Aktieninsitut encourages co-legislators to agree an the amendment put forward by both the European Parliament and the Council to the so-called supervisory review and evaluation process (SREP). The amendment limit the discretion of supervisory authorities to countervail exemptions from formal own funds requirements through the back door - such as the credit valuation risks (CVA risks) exemption for derivatives with ...
Deutsches Aktieninstitut publishes its recommandations for the upcoming negotiations between the EU-Commission, the Council and the Parliament. It strictly opposes the proposal of the Parliament that ESMA should frequently review the clearing threshold in order to increase the clearing rates. However, the proposals regarding the reporting regime lead into the right direction.
Deutsches Aktieninstitut welcomes the EU Commission`s consultation on a fitness check of supervisory reporting requirements under European financial markets regulation. In its response, Deutsches Aktieninstitut illustrates with quantitative evidence costs for German as well as European companies for compliance with the requirements under the derivatives regulation EMIR. To reduce costs for non-financial companies, we suggest to exempt those companies from the obligation to report intragroup ...
The positon paper lays out the benefits of derivative transactions between a centralised treasury unit and the operative subsidiaries of a non-financial group. These transactions are risk-neutral. Therefore, exemptions from the reporting requirements under the EU derivative regulation EMIR, as proposed by the European Commission, are justified.
In a joint association paper Deutsches Aktieninstitut generally welcomes the proposal of the EU-Commission to reduce administrative burden of EMIR especially for non-financial companies. Nevertheless, the paper also describes several problems that are to be solved in order to make the proposal a success story.
Deutsches Aktieninstitut welcomes the EU-Commission's proposal to amend the European derivative regulation EMIR. The proposal to retain the hedging definition as core of the clearing exemption for non-financial companies is of utmost importance. The proposed alleviations in the reporting regimes wait for certain clarifications.
Deutsches Aktieninstitut urges the EU Commission to reflect consequently the needs of companies seeking capital market finance and using derivates for risk management purposes in the Capital Markets Union. The current direction of the Capital Market Union still fails to meet this objective. This position paper has been contributed to the mid term review of the Capital Market Union project.
Deutsches Aktieninstitut provides data for the impact study conducted by the EU Commission regarding EMIR. This data contains costs of a potential clearing or margining obligation and reporting.
Deutsches Aktieninstitut welcomes the proposal to amend the insolvency law released by the Federal Ministry of Justice and Consumer Protection. The proposal provides legal certainty regarding the effectiveness of close-out-netting-clauses in master agreements in the case of insolvency.
Deutsches Aktieninstitut comments on the proposal regarding technical rules of the Institut der Wirtschaftsprüfer in Deutschland e.V. - IDW (Institute of Public Auditors in Germany) for non-financial companies under the derivative regulation EMIR. In its comment Deutsches Aktieninstitut asks the IDW to provide more clarity regarding certain definitons and the scope of the auditing process.
The Net Stable Funding Ration (NSFR) shall ensure that banks have sufficient midterm funding. This position paper is Deutsches Aktieninstitut's comment to a targeted consultation of the EU Commission on the implementation of the NSFR in the EU, which will be due in 2018. Deutsches Aktieninstitut urges the EU Commission to evaluate carefully the impact of the NSFR on the availability and prices of derivatives used for hedgings purposes of non-financial companies.
Starting with Juli 2016 the ECB reference rates for the FX markets will published at 4pm which is two hours after the fixing is calculated. The main objective of this change is to prevent manipulation of the fixings. This position paper questions the necessitiy of the changes and summarizes the practical problems that will result from it for non-financial companies.
Deutsches Aktieninstitut asks the legislator to use the proposed MiFID-delay to fix shortcomings of the level-1-text. Besides others this applies for the treatment of emission allowances within the ancillary activity exemption and the introduction of a waiver for the suitability report.
EBA consults whether banks should face additional own funds requirements for the so called CVA-risks resulting from derivative positions with non-financial companies (NFCs). The position paper shows that the EBA proposal would erode the exemption for exactly these risks granted by the Capital Requirements Regulation. If the EBA proposal for a supervisory guideline became effective the legislator's will would be countervailed and risk management of NFCs would become more costly.
Deutsches Aktieninstitut opposes jointly with five other important German associations (BDI, BGA, DIHK, EFET und VDT) the proposal of ESMA to abandon the hedging exemption for non-financial companies under the derivative markets regulation EMIR. This would force larger companies into the clearing obligation or the obligation to collateralise derivative transactions bilaterally.
Deutsches Aktieninstitut contributes to the EU-Commission's consultation regarding the review of the derivative markets regulation EMIR. It asks the regulator to decrease the regulatory burden for non-financial companies in particular regarding the reporting requirements and the risk mitigating techniques.
Jointly with 19 other associations Deutsches Aktieninstitut launches a proposal for the calculation of the ancillary activity thresholds under MiFID II.
In its comment on the second consultation paper of the European Supervisory Authorities EBA, ESMA and EIOPA regarding bilateral collateralisation of derivatives Deutsches Aktieninstitut addresses concerns that initial margins should be segregated and that bank guarantees should not be acknowledged as collateral.
In its answers to ESMA's consultation on draft technical standards regarding MiFID II/MiFIR Deutsches Aktieninstitut points out that the risk management by non-financial companies should not be negatively affected by the rules. This applies especially for the ancillary activity exemption, the position limits/position reporting and the transparency requirements for the derivative markets.
In its position papers regarding the "technical advice" of ESMA on MiFID II/MiFIR Deutsches Aktieninstitut states that the new rules should not impact equity culture in Europe negatively. This applies especially for the offering of share investment advice in banks and the availability of research for SMEs. Besides, an appropriate definition should ensure that contracts for the delivery of commodities used by the real economy are not classified as derivatives. The comment from 16 January 2015 is ...
In order to enhance data quality under EMIR Deutsches Aktieninstitut recommends in its position regarding the ESMA consultation on EMIR reporting to decrease complexity. Perspectively, the introduction of an one-sided reporting regime and the abolition of the intra-group reporting should improve data quality on trade repository level as well.
The third country provision according to the proposed EU Benchmark Regulation will have negative consequences for non-financial companies. As long as the home countries of the relevant benchmark providers do not enact a similar regulation it is highly likely that a number of important benchmarks will not be available anymore for European banks and thus their customers. This briefing note explains the concerns in detail and supplements a previous position of Deutsches Aktieninstitut.
In its answer to ESMA's consultation on commodity derivatives Deutsches Aktieninstitut asks for the clarification that take or pay clauses in commodity contracts should not be treated as derivatives. Overall, a cash compensation due to force majeure or insolvency should not be confused with a cash settlement.
In the political guidelines for the next EU Commission Jean-Claude Juncker pledges to create a European Capital Markets Union in order to improve the financing of the European economy and in order to further integrate capital markets. This paper lays down Deutsches Aktieninstitut’s perspective on what should be the guiding principles of a proper functioning Capital Markets Union. Our key message is that the perspective on capital markets regulation has to be changed: capital markets, if ...
The EU is about to regulate the processes of the provision of indices and benchmarks. From Deutsches Aktieninstitut’s
point of view summarised in this positio paper the proposed requirements for index providers go too far. The high regulatory intensity will make it more costly to provide a benchmark or contribute data to its calculation, so that
important references might not be available in Europe in the future. This would also happen to the disadvantage of the real economy.
The position paper comments on the draft regulatory standards on bilateral collateralisation of derivatives released by the European supervisory authorities EBA, EIOPA and ESMA. The standards should not oblige all counterparties to collateralise transactions between an EU-bank and a non-EU-entity. Furthermore, the standards should acknowledge bank guarantees as collateral and should ensure that the requirements for the exemption of intra-group transactions are not inappropriate strict.
We comment the draft position paper of Institut der Wirtschaftsprüfer in Deutschland (IDW) regarding the auditing process on the requirements of non-financial companies according to EMIR. So called „take-or-pay-clauses“ in contracts for the delivery of commodities should not be regarded as derivatives. Furthermore, we ask IDW for an appropriate calculation of the clearing thresholds.
The position paper refers to the consultation of the European Commission on the delineation between FX spot and FX forward transactions. We demanded the legislator to apply the already existing definition for certain commodity spot contracts for the FX market as well.
A consultation paper released by the Financial Stability Board discusses different proposals on how information regarding derivative transactions could be aggregated on a global level. Our comment focuses inter alia on the necessity that the aggregation should not aggravate already existing reporting requirements under EMIR.
This position paper is a shorter version of the German position paper on the financial transaction tax originally published on 2 May 2013. It lays down in detail that the financial transaction tax would severely burden the real economy and retail investors.
This position paper lays down in detail that the financial transaction tax would severely burden the real economy and retail investors.
For the second time IOSCO and the Basel committee on banking supervision (BCBS) ask market participants for their view on global standards regarding the collateralisation of derivative transactions. We welcome the clarification that non-financial companies which are not clearing required should not become required to post collateral. Furthermore, FX derivatives should be exempted from the obligations irrespective of their maturity.
Comment of Deutsches Aktieninstitut on the government draft of the legislation for the implementation of the European Market Infrastructure Regulation (EMIR)
Comment of Deutsches Aktieninstitut on the ministerial draft of the legislation for the implementation of the European Market Infrastructure Regulation (EMIR)
The third position paper of Deutsches Aktieninstitut on the exit negotiations between the European Union and the United Kingdom illustrates based on the examples customs and product authorisations as well as data protection and derivatives, what companies can do to solve the problems arising from Brexit. However, it makes also clear that companies especially in the case of a hard Brexit depend on the involvement of regulators and supervisors and cannot mitigate all problems alone. Without ...
The current position paper of Deutsches Aktieninstitut on the exit negotiations between the European Union and the United Kingdom complements the first position paper from February 2017 and covers further relevant topics, e.g. clearing, benchmark and rating. The analyses of financial and capital market legislation and concrete examples from practice illustrate which topics deserve particular attention due to their significance for business and society in connection with the Brexit ...
In its position paper “Exit negotiations between the European Union and the United Kingdom: Minimise Brexit Risks and Strengthen the European Capital Market”, Deutsches Aktieninstitut has identified the essential issues with relevance for capital markets and which deserve particular attention due to their significance for business and society in connection with the Brexit negotiations. Furthermore it makes proposals how the negative impact of Brexit on the affected national economies can be ...
Kurvenlage - Semi-Annual Report of Deutsches Aktieninstitut, 1st Term 2016 (in German)
Focus: Retirement Planning
Focus: Capital Markets Union
Focus: 50 years German stock corporation law
Deutsches Aktieninstitut calls upon the European and British negotiating parties to finally place their trade relations on a new sustainable basis. In its third position paper on the Brexit negotiations Deutsches Aktieninstitut shows using as examples tariffs and product approval as well as derivatives and data protection that companies cannot solve all the problems arising due to Brexit on their own.
The position paper can be downloaded here.
Companies welcome the Commission’s commitment to the existing commercial hedging exemption for companies from clearing and margining, and the move to an asset-by-asset class assessment for this exemption. The hedging exemption is critical to bringing certainty to business decisions and supporting industrial activity in Europe. Today’s announcements are an important step forward in reducing the burdens on corporates. Now it is important that the EU-Parliament and the Member ...
At the traditional Brussels reception of Deutsches Aktieninstitut the new EU Commissioner for Financial Stability, Lord Hill, and Markus Ferber, MEP, delivered speeches to more than 200 guests. Werner Baumann, President of Deutsches Aktieninstitut, outlined the expectations of the German economy on the European legislator and presented the latest positions paper of the institute „The Road to Growth: Setting Capital Markets Regulation Right”.
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