Under the EMIR Regulations, it is expected that the Central Bank of Ireland will be designated as the National Competent Authority for Ireland. The Central Bank of Ireland is the body in situ as the supervisory authority for financial markets and financial service providers in Ireland. Under the EMIR Regulations it will have a range of powers to enable it to fulfil its supervisory functions, including potentially the power to require directors to compile a statement of compliance with EMIR.
It is anticipated that the EMIR Regulations will not include criminal sanctions in respect of infringements of EMIR as initially proposed. Instead sanctions for breach are expected to be limited to administrative penalties only (albeit these are likely to be of a substantial nature).
Many companies will already be familiar with EMIR. Irish registered companies (irrespective of where they are tax resident) are already obliged to report derivative trades to a European registered trade repository. EMIR applies to all types of derivatives (including over the counter ("OTC") derivatives) and applies to both financial firms who use derivatives and non-financial firms who hold large positions in derivatives. Significantly, intragroup arrangements fall within the scope of EMIR.
EMIR forms part of the international effort to increase the stability, transparency and efficiency of derivative markets following the financial crisis and is seen as a key step in the efforts to establish a more effective regulatory framework for European financial markets. EMIR seeks to ensure that information on all European derivative transactions is reported to trade repositories and is accessible by supervisory authorities, including the European Securities and Markets Authority, to give policy makers and supervisors a clear overview of market activity. EMIR also requires standard derivative contracts to be cleared through Central Counterparties and imposes new risk mitigation obligations in respect of OTC derivatives contracts which are not cleared.Similar legislation, in the form of Title VII of the Dodd-Frank Act, has been introduced in the USA.
A copy of EMIR (officially called Regulation 648/2012 on OTC Derivative Transactions, Central Counterparties (CCPs) and Trade Repositories) can be found here.
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