His Majesty's Treasury said it will exempt U.K. pension funds from the clearing obligation for an additional two years.
Under the European Union's European Markets Infrastructure Regulation pension funds in Europe have until June 18 before they are obligated to clear derivatives.
Under the rules of EMIR, all counterparties trading in the European Union are required to post cash, rather than bonds, as the collateral to clear derivatives' exposures. This could mean they have to liquidate otherwise long-term fixed-income investments if they are to be used as collateral.
Following the U.K.'s departure from the European Union in 2020, or Brexit, the U.K. is shaping a new regulatory framework for its financial services sector.
As a result of these changes, the U.K. Treasury said March 28 that it intends to "lay this statutory instrument shortly" to ensure a new exemption comes into force before June 18 and that it will conduct another review of this exemption ahead of its expiration in 2025.
At the same time, European pension funds are expected not to have their clearing obligation further extended under EMIR.
Financial services watchdog European Securities and Markets Authority recommended to the European Commission in January 2022 that the final extension of the clearing exemption should expire June 18, 2023.
