Europe’s top financial watchdogs want to make life easier for smaller players in the derivatives market. On August 3, 2026, the European Banking Authority, the European Insurance and Occupational Pensions Authority, and the European Securities and Markets Authority — collectively known as the European Supervisory Authorities, or ESAs — released a final report proposing bilateral margin amendments that would loosen initial margin rules for counterparties sitting below a €8 billion threshold set under the European Market Infrastructure Regulation, better known as EMIR.
Summary
Key takeaways
- EBA, EIOPA and ESMA published a final report on August 3, 2026 proposing changes to bilateral margin requirements under EMIR.
- The proposal targets counterparties below the €8 billion initial margin threshold, easing their obligations for both new and existing OTC derivative contracts.
- Currently these smaller counterparties are exempt only for new contracts but must still post margin on existing ones — the amendment would remove that distinction entirely.
- The draft Regulatory Technical Standards have been sent to the European Commission, with the European Parliament and Council still to review them before any publication in the EU Official Journal.
- The ESAs say the move responds to industry requests and aims to reduce regulatory burden while aligning EU practice with other jurisdictions.
What the Proposed Bilateral Margin Amendments Actually Change
The core of this proposal is straightforward: it would let smaller derivatives counterparties stop posting initial margin altogether, instead of just for new trades. That’s a meaningful shift from the current setup, and it directly affects how firms below the EMIR threshold manage collateral on their books.
Scope of Amendments for Counterparties Below €8 Billion Threshold
The amendments are aimed squarely at counterparties subject to initial margin requirements that fall under the €8 billion threshold defined by EMIR for exchanging initial margin on uncleared over-the-counter derivative contracts. According to the ESAs’ final report, the goal is to simplify the bilateral margin framework specifically for this group, while also facilitating the eventual phase-out of initial margin obligations for firms in that bracket.
Current vs. Proposed Margin Exchange Obligations
Under today’s rules, counterparties below the threshold already get a break on new contracts — they don’t have to exchange initial margin when entering fresh uncleared OTC derivative agreements. But there’s a catch: they still have to keep exchanging margin on contracts that were already in place before they qualified for that exemption. It’s a split obligation that many market participants have flagged as needlessly complicated.
The proposed EMIR margin requirements revision would erase that split. If adopted, counterparties below the threshold would no longer need to exchange initial margin for new contracts or existing ones. In practice, that means one consistent rule instead of two different treatments depending on when a contract was signed.
Regulatory Process and Next Steps
The proposal still has several institutional checkpoints to clear before it becomes binding law. The ESAs have already submitted the final report along with the draft Regulatory Technical Standards to the European Commission for endorsement, which is the first formal gate in the EU rulemaking pipeline.
Once the Commission completes its review and adoption process, the RTS will move on to scrutiny by the European Parliament and the Council of the European Union. Only after that stage will the amended standards be published in the Official Journal of the European Union, at which point they would take legal effect across the bloc.
Why This ESAs Regulatory Proposal Matters for Markets
This isn’t just a technical tweak buried in financial plumbing — it touches how thousands of smaller firms manage collateral costs tied to derivatives trading. Posting initial margin ties up capital that could otherwise be deployed elsewhere, so removing that requirement for below-threshold counterparties on both new and legacy contracts could meaningfully lower operational friction for firms that never posed the systemic risk the original rule was designed to address.
There’s also a competitive angle here. The ESAs explicitly note that the changes support greater consistency with how other jurisdictions treat similar counterparties, suggesting Brussels is trying to avoid putting EU-based firms at a disadvantage compared to peers operating under different regulatory regimes. For an industry that has repeatedly pushed for simplification, this proposal reads as a direct response to those requests rather than a top-down regulatory initiative.
Whether the change goes through unaltered is still an open question, since both Parliament and Council retain the power to send it back or demand revisions. But the direction of travel is clear: regulators are signaling a willingness to scale back initial margin obligations where the underlying risk profile doesn’t justify the administrative cost.
FAQ
What are the proposed changes to the bilateral margin requirements under EMIR?
The proposed amendments would exempt counterparties below the €8 billion threshold from exchanging initial margin for both new and existing OTC derivative contracts.
Who are the European Supervisory Authorities involved in this proposal?
The proposal is published by the European Banking Authority (EBA), the European Insurance and Occupational Pensions Authority (EIOPA), and the European Securities and Markets Authority (ESMA).
What is the current margin exchange obligation for counterparties below the €8 billion threshold?
Currently, these counterparties are exempt from exchanging initial margin for new OTC derivative contracts but must exchange margin for existing contracts.
What are the next steps after the submission of the draft RTS to the European Commission?
After the Commission’s review and adoption, the RTS will be scrutinized by the European Parliament and the Council before publication in the Official Journal of the European Union.
Article produced with the assistance of artificial intelligence and reviewed by the editorial team.
