OTC Derivatives: a Victory or a Battle Lost?
by François Masquelier, Head of Corporate Finance and Treasury, RTL Group, and Honorary Chairman, EACT
Even if corporate treasurers obtain the exemption of OTC derivative reform from the EMIR (European Market Infrastructure Regulation), as we all might reasonably expect, this temporary victory could hide the ineluctable future of the derivative market. Realistically, we can see that derivatives will become more and more expensive over time and that we will have more administration to deal with the various types of financial instruments. The most prudent treasurers would be tempted to say that it would be better to wait for the final outcome of this key reform before shouting ‘victory’. The European institutions and MEPs have accepted the idea of an exemption (despite the fact that some populist tendencies would favour no exception at all). However, the form of the exemption is not yet defined. EACT has heavily lobbied to avoid any exemption based on certain types of products or (even worse), on qualification for hedge accounting. And even if they decide to adopt an exemption based on a defined threshold, there are open questions such as at which level should we fix this threshold and how should we apply it in practice? In case we are above the predetermined threshold (limit), would the whole portfolio be tainted and non-exempted? There are as we can see many open issues even if treasurers succeed in being exempted.