|CRR exemption for commodity dealers|
|European Union Electricity Market Glossary|
Under Article 498(1) of CRR (Regulation (EU) No 575/2013 of the European Parliament and of the Council of 26 June 2013 on prudential requirements for credit institutions and investment firms and amending Regulation (EU) No 648/2012 (OJ L 176, 27.6.2013, p. 1)) some commodity dealers falling within the scope of MiFID II are transitionally exempt from the CRR's provisions on own funds requirements until 31 December 2017 at the latest if their main business consists exclusively of providing investment services or activities relating to commodity derivatives.
Commodity dealers, being a heterogenous category, are defined in this context as "investment firms whose main business consists exclusively of the provision of investment services or activities in relation to the financial instruments set out in points 5, 6, 7, 9 and 10 of Section C of Annex I to Directive 2004/39/EC and to whom Council Directive 93/22/EEC of 10 May 1993 on investment services in the securities field did not apply on 31 December 2006".
If the exemption was not extended, commodity dealers (among others energy firms) would have to begin complying with capital requirements in 2018.
Another commodity dealer exemption that - pursuant to Article 493(1) of the CRR - expire on 31 December 2017 is the one that exempts commodity dealers from large exposures requirements.
Both 'sunset clauses' were included in the CRR in order to allow time for regulators to determine a prudential regulation adapted to the risk profile of commodity dealers.
CRR required the European Commission to report by 31 December 2015 on an "appropriate regime for the prudential supervision of investment firms" that trade exclusively in commodity derivatives, as well as whether a new category of investment firm should be created for companies that exclusively trade certain commodity contracts.
As the above scoping excersise has not been finished by the set date, the European Commission proposed on 16 December 2015 (see the European Commission Proposal of 16 December 2015 for a Regulation of the European Parliament and of the Council amending Regulation (EU) No 575/2013 as regards exemptions for commodity dealers, COM(2015) 648 final (2015/0295 (COD)) to extend commodity dealers exemption until 31 December 2020 and, consequently, to amend the CRR in the following way:
Regulation (EU) No 575/2013 is amended as follows:
(1) in Article 493(1), the second sentence is replaced by the following:
"This exemption is available until 31 December 2020 or the date of entry into force of any amendments pursuant to paragraph 2 of this Article, whichever is the earlier.";
(2) in Article 498(1), the second subparagraph is replaced by the following:
"This exemption shall apply until 31 December 2020 or the date of entry into force of any amendments pursuant to paragraphs 2 and 3, whichever is the earlier."
The press release of 23 March 2016 refers to the European Council acceptance of the above proposition (Commodity dealers: Council agrees to extend exemption), which has been followed by the analogous decision of the European Parliament on 11 May 2016 (European Parliament legislative resolution of 11 May 2016 on the proposal for a regulation of the European Parliament and of the Council amending Regulation (EU) No 575/2013 as regards exemptions for commodity dealers (COM(2015)0648 – C8- 0403/2015 – 2015/0295(COD)).
|Last Updated on Saturday, 28 May 2016 10:06|