EMIR Refit – Your path to compliance
A decade of regulations to enhance derivates market integrity
Risks associated with Over-the-Counter (OTC) derivatives trades — including systemic, counterparty credit and operational risk — were in the spotlight of regulators following the 2008 global financial crisis. In response, a global framework for reporting requirements was created and the “European Market Infrastructure Regulation (EMIR)” was introduced in Europe by the EU parliament, requiring all firms that engage with derivatives contracts, to report the transaction. The objective was to increase transparency and identify any systemic risks linked to these transactions.
This publication represented a first stone set by the regulator which has been regularly finetuned through the monitoring and observation of the market implementation. This led the European Commission to publish the first Refit proposal in 2017, which eventually entered into force in 2019 as Regulation (EU) 2019/834 — also known as “EMIR Refit” . The regulator conducted this review to address shortfalls and, in some cases, alleviate compliance burdens, such as inconsistent definitions and formats that do not align with global standards, and the lack of detailed information for reporting validation and reconciliation processes.
Finally, another cycle of revision was conducted through exchanges with stakeholders, such as industry working groups. In October 2022, ESMA published the revised ITS/RTS Technical standards on reporting and the deadline for their implementation, thereby confirming the start date of the new reporting requirements on 29 April 2024.
EMIR Refit aims to increase the derivatives transactions transparency, standardization and data quality
The following can be listed as key objectives of this latest adjustment:
- Enhancing reporting robustness and completeness of derivative products (OTC derivatives and listed derivatives) among entities;
- Improving the regulators' ability to measure risk and supervise finance markets by improving transparency, granularity and standardization of the information required;
- Achieving higher quality in reported data by, among other measures, setting a common language, increasing derivatives reportable fields, enhancing reconcilable fields, and analysing derivatives data by product type.
How does the EMIR Refit impact you?
This regulatory revision introduces some critical updates, including: the enrichment of set of identifiers between OTCs trades , the increase of number of fields to be reported and reconciled , the standardization of the format to be submitted to the Trade Repository and the revision of the reporting lifecycle events.
Entities will have to implement the following changes in their reporting framework, processes and tools:
- Determining the reporting obligations, ownership, and the responsible party with counterparties to adequately complete new fields;
- Making design decisions on any new data fields and adapt reporting tools to communicate with Trade Repositories and the Regulator;
- Submitting all collateral data through a separate XML report (including pre-haircut and post-haircut fields);
- Reviewing process controls for impacts from lifecycle event changes and establishing new controls on counterparties’ classifications;
- Maintaining new record of any concluded or modified derivative contract for at least five years following the termination of the contract and meeting the expectation to retrieve these records based on Trade Repositories submitted reports;
- Defining new written procedures covering resolution of reconciliation breaks, and ensuring procedures contain scenarios for non-available information;
- Ensure relevant and meaningful oversight on reporting quality (delegated or self-reported), covering the 3 axes of timely, accurate and complete reporting.
It is time to act: How can you address these new requirements?
Competent authorities are reminding all stakeholders involved in the EMIR reporting value chain to engage in effective and efficient planning for the implementation of these updates. Unfortunately, the impacts on reporting set-ups will be substantial. All impacted entities should plan sufficient time to implement the new requirements, be compliant by 29 April 2024 and should leverage accelerators where possible.
The impact will affect the value chain, and addressing it requires a broad level of skillsets, including client on-boarding expertise, understanding of business requirements and regulatory expectations, operational know-how, and governance knowledge.
Over the past decade, Deloitte has developed our own reporting solutions to assist our clients with tackling the same challenges faced by other counterparties, when submitting exhaustive and accurate reports to trade repositories. We have built a dedicated team of specialists to fully support you, our clients, with a full suite of transactional regulatory requirements and offer thoughtful advice, practical and pragmatic solutions, as well as managed services.
We are ready to support impacted entities like you in scoping, design, and implementation of the EMIR Refit updated requirement through three phases:
1. Gap and impact assessments between your current set-up and EMIR Refit requirements;
2. Design of custom implementation roadmap for your gap remediation;
3. Support through your implementation and post-implementation.
You will receive project coordination and delivery of agreed-upon analysis through a PMO role. Additionally, our subject matter experts will provide you with tailored technical advisory guidance, taking into account your organization’s specific context and priorities.
Would you like to know more? Contact us and learn about EMIR Refit and its potential impact on your organization!
1Regulation (EU) No 648/2012 of the European Parliament and of the Council Of 4 July 2012 On Otc derivatives, central counterparties and trade repositories: https://eur-lex.europa.eu/legal-content/EN/TXT/HTML/?uri=CELEX:32012R0648
2Regulation (EU) 2019/834 of the European Parliament and of the Council of 20 May 2019: https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:32019R0834
3Example: Unique Product Identifier (UPI) introduced, Unique Transaction Identifier (UTI) introduced, Legal Entity Identifiers (LEI) renewal validated only for reporting counterparty
4Example: Reports must comply ISO 20022, +57% fields to be reported and 33% modification in the current field, +67% reporting fields to be reconciled
