UK makes intragroup OTC derivatives exemptions permanent

Groups with UK and overseas entities can treat qualifying OTC derivative contracts between group members as intragroup transactions whether or not the overseas jurisdiction has been found equivalent under Article 13 of UK EMIR.Legislation The test is that both counterparties are included in the same consolidation on a full basis and are subject to appropriate centralised risk evaluation, measurement and control procedures.Legislation The consolidation references are simplified, including to the Companies Act 2006 and to UK-adopted international accounting standards recognised as equivalent for the purposes of Commission Decision 2008/961/EC.

For the clearing obligation in Article 4, contracts between two counterparties established in the United Kingdom that meet the Article 3 conditions are exempt without an FCA notificationLegislation. Contracts between a UK counterparty and a third-country group entity, and contracts between counterparties established in one or more third countries where one counterparty notifies, are exempt where the Article 3 conditions are met, the UK counterparty or one of the counterparties notifies the FCA of the intended use, and the FCA does not object.Legislation Counterparties may use the exemption on expiry of the 30 calendar day period beginning with the day after the FCA receives a complete notification in accordance with Article 20A of Regulation 149/2013, or earlier if the FCA confirms it does not object.Legislation The FCA may make technical standards specifying the procedures for using these exemptions.

For margin on uncleared contracts under Article 11, the condition is reframed so the exemption is available unless there is a material practical or legal impediment to the prompt transfer of own funds or repayment of liabilitiesLegislation. UK to third-country and third-country to third-country intragroup transactions falling within Article 3(1) are exempt from the Article 11(3) requirement on the same notify-and-no-objection basis, with the 30-day period running from receipt of a complete notification in accordance with Article 32 of Regulation 2016/2251.Legislation The provisions that required FCA approval processes and public disclosure of margin exemptions are removedLegislation, and related FCA functions are updated to refer to Article 11(5) to (5B).

An exemption in respect of an intragroup transaction which applied immediately before commencement is to continue to have effect for the purposes of Article 4(2) or Article 11(5A) or (5B).Legislation That continuity applies where the exemption resulted from an application or notification to the FCA and the FCA had, before the exemption took effect, approved the application or not objected to the notification. That covers applications or notifications made before IP completion day in the circumstances of regulations 80(1) or (2) of the 2019 Regulations, in the circumstances of regulation 82(5), or in accordance with Article 4(2) or Article 11(5A) or (5B) as then applied. Firms in that position do not need to re-apply or re-notify.Legislation

The Regulations extend to England and Wales, Scotland and Northern Ireland and come into force when the revocation of Part 5 of the 2019 Regulations by the Financial Services and Markets Act 2023 comes into forceLegislation. They were made on 21 October 2026. The instrument does not create a credit valuation adjustment exemption; intragroup CVA treatment moves to the Prudential Regulation Authority's Basel 3.1 framework taking effect on 1 January 2027, with outstanding qualifying transactions expected to remain exempt at transition and new transactions from that date relying on the PRA conditions.

Legal basis is the Over the Counter Derivatives (Intragroup Transactions) Regulations 2026 (SI 2026/1117)Legislation, amending Articles 3, 4 and 11 of Regulation (EU) No 648/2012 as it forms part of UK lawLegislation, with consequential amendments to SI 2013/504 and transitional provision in regulation 7.