EMIR 3.0 Directive: Counterparty And Concentration Risks In Focus

EMIR 3.0 comprises:

• A Regulation (the Regulation) amending Regulation (EU) No 648/2012 (EMIR), Regulation (EU) No 575/2013 (CRR) and Regulation (EU) 2017/1131 (the Money Market Funds Regulation); and
• A Directive (the Directive) amending Directive 2009/65/EC (the UCITS Directive), Directive 2013/36/EU (CRD IV) and Directive (EU) 2019/2034 (the Investment Firms Directive).

EMIR 3.0 was published in the Official Journal of the European Union on 4 December 2024. Whilst the majority of the Regulation applied from 24 December 2024, the Directive requires transposing measures in order to become fully effective. Member States were required to publish these by 25 June 2026.

This briefing focuses on the objectives of the Directive, both in terms of amending counterparty risk limits for derivative transactions entered into by UCITS, and ensuring that credit institutions, investment firms and competent authorities adequately monitor and mitigate the concentration risk arising from exposures towards central counterparties (CCPs).

For more details on the Regulation, including the provisions around the active account requirement, please see our previous insights here: EMIR 3.0 Update and the Active Account Requirement.

The Directive updated the UCITS Directive to re-orient the risk limits from a focus on over-the-counter (OTC) derivatives to non-centrally cleared derivatives. Whereas previously the UCITS Directive imposed regulatory limits on counterparty risk only in respect of OTC derivative transactions, the amendments mean that the applicable counterparty risk limits will now be assessed on the basis of whether or not a derivative transaction has been centrally cleared through a CCP that is authorised or recognised under EMIR. This recognises central clearing arrangements as the real mitigant to the counterparty risk inherent in derivative contracts, and levels the playing-field between exchange-traded and OTC derivatives.

In terms of CRD IV and the Investment Firms Directive, the Directive introduced measures to foster the identification, management and monitoring of concentration risk arising from exposures towards CCPs, and enhanced the supervisory tools and powers available to competent authorities tasked with monitoring concentration risk arising from these exposures. These amendments were driven from a financial stability perspective and aim to mitigate potential contagion risks. More specifically, the Directive requires:

• Credit institutions and investment firms to have effective processes to identify, manage, monitor and report on concentration risk arising from exposures towards CCPs, taking into account the active account requirement
• The management bodies of credit institutions and investment firms to develop specific plans and quantifiable targets to monitor and address the concentration risk arising from exposures towards CCPs offering services of substantial systemic importance
• Competent authorities to:
  • ensure that investment firms have robust strategies, policies, processes and systems for the identification, measurement, management and monitoring of material sources and effects of concentration risk arising from exposures towards CCPs and any material impact on own funds
  • assess and monitor developments in the practices of credit institutions and investment firms concerning the management of their concentration risk arising from exposures towards CCPs, including the plans referred to above and the progress made in adapting their business models to the active account requirement
  • have the power to require credit institutions and investment firms, where the competent authority considers that there is excessive concentration risk arising from exposures towards a CCP, to reduce exposures towards that CCP or to realign exposures across their clearing accounts in accordance with the active account requirement

Ireland has published the European Union (Undertakings for Collective Investment in Transferable Securities) (Amendment) (No. 2) Regulations 2026 (S.I. No. 289/2026) and the European Union (Investment Firms) (Amendment) Regulations 2026 (S.I. No. 290/2026), which implement the requirements relating to UCITS and investment firms into Irish law. Further measures are expected in terms of credit institutions. Furthermore, certain actions are also outstanding at an EU level. The Directive requires the EBA, in cooperation with ESMA, to publish guidelines specifying a consistent methodology for integrating the concentration risk arising from exposures to CCPs into supervisory stress testing by 25 June 2026. These guidelines are still outstanding. We will continue to monitor for Irish transposing measures and EU level guidance, and will publish further updates as developments arise.