Policy paper

Policy note - Updating the UK’s exemption framework for intragroup Over the Counter Derivatives

Published 5 November 2025

Introduction

A derivative is a contract between two or more parties whose value is derived from an underlying asset or set of assets (such as equities, bonds, commodities or currencies), or a benchmark (such as an interest rate or market index). They are commonly used by companies to help manage and mitigate financial risks but can also be used for other reasons such as speculation. Derivatives play a significant role in modern financial markets by facilitating risk transfer, price discovery and market efficiency.

Derivatives are most often contracted between two different parties either directly (“over-the-counter” or “OTC”) or over an exchange (“exchange traded”). However, they can also take place bilaterally between two entities that are part of the same corporate group. This is known as an “intragroup” transaction. Intragroup transactions are an important risk management tool for corporate groups, allowing firms to centralise and manage risks within specific subsidiaries or at the group level. They also support more efficient compliance with regulatory requirements, particularly in relation to capital and risk management.

Given their function as a risk management tool and corporate groups’ ability to centrally manage counterparty credit risks arising from OTC derivatives, intragroup transactions may be exempt from certain regulatory requirements that apply to non-intragroup transactions. The regulatory framework for intragroup derivative transactions is set out primarily in Title II of the European Market Infrastructure Regulation as assimilated into UK law (“UK EMIR”).^{[footnote 1]}

UK EMIR sets out the requirements for an intragroup transaction. Intragroup transactions between two UK counterparties which meet specific criteria can then be exempt from certain regulatory requirements that ordinarily apply to OTC transactions, including:

A. The obligation to clear certain types of OTC contract through a central counterparty (i.e. an exemption from the clearing obligation).

B. Requirements to post margin (i.e. financial collateral).

C. Requirements to apply Credit Valuation Adjustment (“CVA”) capital requirements.^{[footnote 2]}

Transaction between a UK counterparty and an overseas counterparty can also benefit from these exemptions if the overseas counterparty is located in a jurisdiction that has been declared equivalent under Article 13 of UK EMIR.

Where no equivalence determination has been made for an overseas jurisdiction, the UK’s “Temporary Intragroup Exemption Regime” (TIGER)^{[footnote 3]} also provides an additional route for firms, subject to relevant approvals by the FCA, to obtain exemptions from clearing and margin requirements (but not the requirement to hold CVA capital). TIGER was established as part of EU exit to allow for the continuation of such intragroup exemptions obtained before the end of the EU exit transition period and permit counterparties to apply for new intragroup exemptions in this circumstance. TIGER was originally set to expire in December 2023 but was subsequently extended by HM Treasury until the end of 2026.^{[footnote 4]}

The government recognises the importance intragroup exemptions have in supporting UK firms’ global operations and the need to replace TIGER with a more stable, long-term framework. As such, the government has previously set out its intention to make the intragroup exemption frameworks for margin and clearing, as currently enabled by TIGER, permanent.^{[footnote 5]} This would provide longer-term certainty for firms and support the growth and competitiveness of the UK’s economy and financial services sector.

The government is therefore now publishing for technical comment a draft statutory instrument, The Over-the-Counter Derivatives (Intragroup Transactions) Regulations 2026 (the “Regulations”), which would implement these changes.

Alongside making the exemptions currently provided for by TIGER permanent, the instrument also looks to streamline the intragroup exemption process. This should be considered alongside supporting changes that the Financial Conduct Authority (FCA) are proposing to further simplify the exemption process, which will be published shortly after this draft statutory instrument.

The Over-the-Counter Derivatives (Intragroup Transactions) Regulations 2026

The draft Regulations reform the intragroup regime set out in UK EMIR with a view to:

I. Widening the availability of permanent intragroup exemptions for margin and clearing given their usual risk management function, whilst ensuring that the use of these exemptions is still subject to robust monitoring and approval by the financial services regulators. The Regulations achieve this by altering the requirements for an intragroup transaction in Article 3 of UK EMIR, such that it no longer links to equivalence decisions under Article 13 of UK EMIR. This means if transactions meet the remaining criteria in Article 3, they will be considered intragroup transactions regardless of whether the intragroup counterparty is located in a jurisdiction which has been declared equivalent under Article 13 of UK EMIR or not. This would allow for a much greater range of intragroup transactions between UK and overseas firms to benefit from the clearing and margin exemptions on a non-temporary basis, subject to firms following the relevant process required under EMIR to obtain these exemptions.

II. Streamlining the intragroup exemption process for margin and clearing to make it simpler and faster for firms to obtain and use exemptions. The Regulations do this by amending Articles 4 and 11 of UK EMIR. For example, for intragroup transactions between UK and non-UK group entities under this new framework, firms would only need to notify the FCA of their intention to use these exemptions and for the FCA to not object to the use of the exemption within a 30-day period. This would, in practice, replace the current situation under TIGER where the FCA has to approve such an exemption before a firm can make use of it. The FCA will be publishing, following this draft SI, a set of draft updated rules for consultation regarding how it will implement this new non-objection process.

III. Ensuring that firms currently benefitting from intragroup exemptions granted under TIGER can continue to benefit from these exemptions once this regime expires without the need to re-apply to the FCA (subject to certain conditions). As such, the SI includes a transitional provision to this effect.

The Credit Valuation Adjustment

As it stands, the draft SI does not make changes in relation to the exemption from applying CVA capital requirements. This exemption is not legislated for directly by UK EMIR. Rather, the exemption applies as the result of a link between Article 3 of UK EMIR and Article 382 of the UK’s Capital Requirements Regulation (UK CRR),^{[footnote 6]} whereby any transaction that qualifies as intragroup within the UK EMIR definition is exempt from the requirements of the CVA as set out within the UK CRR. This exemption is not available via TIGER.

As part of their work on implementing Basel 3.1, the Prudential Regulation Authority (PRA) have already announced a framework^{[footnote 7]} by which they will exempt intragroup transactions from CVA capital requirements. This framework will come into effect, alongside the wider UK implementation of the Basel 3.1 reforms, on 1 January 2027.

It is the government’s intention that this PRA-led process will be the only route through which firms apply to receive CVA capital exemptions. As such, the government will be making such changes to the draft SI to ensure that its modifications to Article 3 of UK EMIR align with this PRA framework. Any necessary changes will be incorporated in the final version of the SI.

HMT and the PRA intend to ensure, where required to provide for continuity, that existing exemptions that have been granted as the result of an EMIR 13 equivalence determination are carried over into this new framework.

Next steps and feedback

The government welcomes any technical comments on the draft SI by 16 January 2026. Feedback can be provided to the following email address: FMIPolicyBranch@hmtreasury.gov.uk.

Any feedback may be shared with the Bank of England and the FCA.

The government then intends to lay this SI before Parliament in the first half of 2026, subject to Parliamentary time allowing. This is intended to allow for the new framework to be brought into force at the expiry of TIGER at the end of 2026.

HMT will co-ordinate with the FCA and PRA to ensure that, where relevant, the alterations to provisions within UK EMIR will be brought into force in conjunction with the bringing into force of any FCA and PRA rule changes.

The government has also set out its intention to review the remainder of UK EMIR Title II as a priority. The government intends for any policy changes implemented by the draft Regulations to be maintained over the course of that work, noting that some amendments to the legislation may be needed to transfer it from Title II UK EMIR to domestic statute once Title II is repealed.

1. Regulation (EU) No 648/2012 of the European Parliament and of the Council of 4 July 2012 on over-the-counter derivatives, central counterparties and trade repositories. ↩

2. There is also a reporting exemption for intragroup transactions where at least one of the counterparties is a non-financial counterparty. However, as the government is not taking forward any changes to the reporting regime at this time, this has not been considered further within this note. ↩

3. Set out in Article 82 of The Over the Counter Derivatives, Central Counterparties and Trade Repositories (Amendment, etc., and Transitional Provision) (EU Exit) Regulations 2019. ↩

4. The Pension Fund Clearing Obligation Exemption and Intragroup Transaction Transitional Clearing and Risk-Management Obligation Exemptions (Extension and Amendment) Regulations 2023 ↩

5. Updating the UK’s regulatory framework for central counterparties, paragraph 1.14. ↩

6. Regulation (EU) No. 575/2013 of the European Parliament and of the Council of 26 June 2013 on prudential requirements for credit institutions and investment firms and amending Regulation (EU) No 648/2012. ↩

7. Chapter 7 – Credit valuation adjustment and counterparty credit risk Bank of England ↩