EMIR and PIK notes: Difference between pages

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The European Market Infrastructure Regulation<ref> http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2012:201:0001:0059:EN:PDF</ref> (EMIR) became law within the European Union in 2012, although certain of its requirements came into force only after a period of delay.
Debt instruments based on non-cash payment of interest coupons.


The objective of EMIR is to reduce the risks posed to financial systems from the vast web of [[Over the counter]] (OTC) derivative transactions and the large contingent credit exposures that may arise as a consequence.
Interest is usually recognised by an increase in the amount of principal owed by the borrower.




The Regulation achieves this object by three significant requirements for:
PIKs are generally either unsecured loans or deeply subordinated securities ranking just before equity in the capital structure.


#Central clearing and margining of standardised OTC derivatives (with certain exemptions for Non-Financial Counterparties)
This means that, in the event of a bankruptcy, PIKs are the last debts to be repaid, making them a high risk instrument for lenders and investors.
#Reporting of all derivative transactions to a trade repository
 
#Risk mitigation measures for all non cleared derivatives including collateral exchange and  confirmation and reconciliation procedures
In order to compensate lenders for the risk, PIKs have to offer significantly enhanced rates of return to investors.




== See also ==
== See also ==
* [[AIFMD]]
* [[Coupon]]
* [[Buy-side firm]]
* [[Equity]]
* [[CCP]]
* [[Interest]]
* [[CFTC]]
* [[Notes]]
* [[Clearing]]
* [[Payment in kind]]
* [[CSD]]
* [[Principal]]
* [[Derivative instrument]]
* [[Secured debt]]
* [[Dodd-Frank]]
* [[Subordinated debt]]
* [[Dual reporting]]
* [[Unsecured debt]]
* [[ESMA]]
* [[European Union]]
* [[FATCA]]
* [[FC]]
* [[Infrastructure]]
* [[Know-your-customer]]
* [[Legal entity identifier]]
* [[Margining]]
* [[MiFID]]
* [[MiFID II]]
* [[NFC]]
* [[OTC]]
* [[Pension Scheme Arrangement]]
* [[RTS]]
* [[SEC]]
* [[SSR]]
* [[Trade repository]]
* [[UTI]]
* [[WGMR]]
 
 
 
===Other links===
[http://www.treasurers.org/otc ACT briefing note: European regulation of OTC derivatives: Implications for non-financial companies, April 2013 ]
 
[http://www.treasurers.org/node/9344 EMIR edges near, The Treasurer, September 2013]
 
[http://www.treasurers.org/node/9406 Frequently Asked Questions for non financial counterparties - updated December 2013]
 
[http://www.treasurers.org/node/9873 Companies hope for relief from EMIR, Sally Percy, The Treasurer, February 2014]
 
[https://www.treasurers.org/ACTmedia/EMIR_Consulation_Response_August_2015.pdf ACT's EMIR Consultation Response, August 2015]
 
 
===References===
<references />
 
[[Category:Accounting,_tax_and_regulation]]
[[Category:Corporate_financial_management]]
[[Category:Risk_frameworks]]

Revision as of 14:21, 22 August 2017

Debt instruments based on non-cash payment of interest coupons.

Interest is usually recognised by an increase in the amount of principal owed by the borrower.


PIKs are generally either unsecured loans or deeply subordinated securities ranking just before equity in the capital structure.

This means that, in the event of a bankruptcy, PIKs are the last debts to be repaid, making them a high risk instrument for lenders and investors.

In order to compensate lenders for the risk, PIKs have to offer significantly enhanced rates of return to investors.


See also