INREV, the European Association for Investors in Non-Listed Real Estate Vehicles, has called on the European Commission to consider steps to reduce the complexity and cost of the European Market Infrastructure Regulation (EMIR) for real estate fund managers.
The Commission is reviewing its regulation on over-the-counter derivatives, central counterparties, and trade repositories. In real estate investment this most commonly applies to the use of interest and foreign exchange rate swaps by fund managers.
In response to a public consultation, INREV highlighted the disproportionate burden the regulation places on non-financial counterparties (NFCs). The rules are particularly punitive for smaller fund managers who often lack the resources to ensure full compliance. Feedback from fund managers points to the substantial cost of checking repository data and the difficulty of converting it into a format that is easy for NFCs to use and understand.
INREV is proposing the introduction of a single-sided reporting system for NFCs, meaning only one party to the transaction would need to report it. This change would result in regulators still being able to access the necessary data on trades from the financial counterparty, usually a bank, while relieving the burden on real estate fund managers.
Should the Commission decide that this change is not appropriate, INREV urged it to consider an exemption for NFC trades below the ESMA clearing threshold. Finally, if the current reporting format is to be retained, INREV has recommended a number of improvements that can be made, including increased transparency of data, as well as the creation of a panel to review the ease of access to trade repositories.
Jeff Rupp, INREV’s Director of Public Affairs, said: “We don’t dispute regulators’ need to receive data about derivative trades. However, we are convinced that the current regime is unnecessarily complex and burdensome.” He went on to add: “We hope the Commission will remedy this given the relatively small potential impact real estate fund managers have on systemic risk.”
Source: INREV
