Dutch regulators follow ESMA's advice on central clearing

Dutch financial supervisors DNB and AFM have said they will not force pension funds to conduct derivatives transactions through central clearing if an expected extension of the current European exemption for pension funds comes too late.

Both regulators followed the advice of European watchdog ESMA, which recommended that local supervisors should be flexible in case the European Union failed to extend the current exemption – which runs until 16 August for large pension funds.

Yesterday, the UK’s Financial Conduct Authority said it would not require pension funds or their counterparties to start putting processes in place to clear derivatives in line with the European rules of EMIR.

Although the general expectation is that the extension will be granted, the European Parliament, the European Commission as well its member states are still discussing details.

In theory, large pension funds with more than €8bn of non-cleared derivatives must temporarily transact through central counterparties if there is no deal as of 17 August.

Pension funds have been exempt from mandatory central clearing since 2012, and are still allowed to clear bilaterally with the bank with which the contract has been concluded.

Last week, industry organisation PensionsEurope asked European regulators for guarantees that they would not enforce central clearing if an extension deal had not been reached in time.

The Dutch Pensions Federation described the regulators’ position as a “proper solution of a temporary problem”.

The problems don’t apply for smaller pension funds, which have been exempt from central clearing until the summer of 2019.