UK confirms extension to intragroup and pensions exemptions under UK EMIR

UK EMIR temporary exemptions to be extended

On 28 March 2023, HM Treasury confirmed that it intends to extend the UK EMIR¹ temporary intragroup exemption regime until 31 December 2026 and the temporary clearing exemption for pension funds until 18 June 2025.

Temporary UK-to-non-UK intragroup exemption regime

The temporary intragroup exemption regime, or TIGER, is established under Regulation 82 of  The Over the Counter Derivatives, Central Counterparties and Trade Repositories (Amendment, etc., and Transitional Provision) (EU Exit) Regulations 2019 (EMIR onshoring regulations), which form part of the suite of documents onshoring and amending UK EMIR. Under Regulation 82, temporary exemptions from clearing and margining are available for intragroup transactions between a UK entity and a non-UK entity established in a jurisdiction which has not been found equivalent by the Treasury. 

The exemptions are currently due to run until 31 December 2023. If equivalence is granted in respect of an applicable jurisdiction in the meantime, the exemptions will be curtailed and will expire either two months (for clearing exemptions) or four months (for margin exemptions) after equivalence is granted. Permanent exemptions – for which equivalence is a pre-requisite – can then be sought instead. 

The Treasury's announcement confirms that the December 2023 expiry date will be deferred, so that the exemptions run instead until 31 December 2026. They will remain subject to the making of an equivalence decision in the meantime, in which case the current two- and four-month cut-off times will apply.

The three-year extension is expected to be implemented by way of statutory instrument amending the EMIR onshoring regulations. 

Temporary clearing exemption for pension funds

The same statutory instrument is expected to extend the temporary clearing exemption for pension scheme arrangements by a further two years, until 18 June 2025.

The current exemption, which is established under Article 89 of UK EMIR, allows UK and EEA pension scheme arrangements to defer until 18 June 2023 compliance with the UK EMIR clearing obligation where the derivative transactions that would otherwise need to be cleared reduce investment risks that are directly related to the scheme's financial solvency. 

The extension is expected to be implemented by amending Article 89 of UK EMIR. 

The Treasury has also confirmed that it plans to conduct a review of the pension fund exemption ahead of the new 2025 expiry date, with a view to developing a longer-term approach.

Timing

The Treasury plans to lay the amending statutory instrument imminently, to ensure that the extension takes effect before the 18 June 2023 expiry date.

Position under EU EMIR

Temporary intragroup exemption regime: In February 2023, the EU extended its temporary intragroup exemption regime so that it expires on 30 June 2025, eighteen months before the UK regime. Intragroup exemptions are widely used by international groups conducting cross-border transactions, so affected entities should monitor developments closely and ensure that they are aware of (i) the expiry date of the applicable regime and (ii) any relevant equivalence decisions that curtail the current protection and require action to obtain a permanent exemption. 

In conjunction with the extension, the European Commission has also proposed amendments to the EU EMIR intragroup regime, which would replace the requirement for an equivalence decision with a requirement that the third-country jurisdiction is not a "blacklisted" jurisdiction (read more in our briefing).

Pension scheme arrangement exemption: The corresponding pensions exemption under EU EMIR, which only applies to EU pension scheme arrangements and does not extend to UK equivalents, is due to expire on 18 June 2023. 

For more information on UK EMIR and EU EMIR, please see our EMIR Hub.

Authors: Daniel Franks and Kirsty McAllister-Jones

_{1. The onshored version of EU Regulation 648/2012.}