Statement on the Variation Margin requirements under EMIR for physically settled FX forwards

The Central Bank welcomes the recent European Supervisory Authorities (ESAs) statement on the variation margin requirements under EMIR for physically settled FX forwards. The Central Bank notes that the ESAs are undertaking a review of the relevant requirements and will propose some targeted amendments.  These are likely to continue to require the exchange of variation margin for physically-settled FX forwards in a risk based and proportionate manner but to limit the scope to transactions between institutions (credit institutions and investment firms).

The Central Bank confirms that, in accordance with the recommendation from the ESAs and pending the outcome from their review, the Central Bank will apply its risk-based supervisory powers in the day-to-day enforcement of applicable legislation in a proportionate manner.