For institutions that fall under the regulations of the European Economic Area (EEA), the European Markets Infrastructure Regulation (EMIR) brings a challenging requirement to reconcile portfolios with all counterparties. It does not matter where those counterparties are based or incorporated and this also affects external or intra-group trading.

The bank needed to know:

  • how the regulations would affect the ongoing costs of their business
  • which processes and IT systems would have to be changed
  • which ‘one-off’ preparations would be required
  • An analysis was conducted, looking at trading data, counterparty data, legal documentation, company structure data and current and planned reconciliation. The aim was to highlight the total scope of and incremental reconciliation that would be needed, broken down by counterparty type (internal/external, FC/NFC, EEA incorporated/non-EEA incorporated) and portfolio size.
  • All IT systems requiring change were identified, as were specific areas within the business.
  • Based on high-level discussions with the relevant departments, the business processes were identified that would be affected.
  • The team liaised closely with the legal department and external trade bodies to clarify intentions and determine likely outcomes relating to grey areas in the EMIR requirements
  • As a result of the project, a document was produced detailing the likely impacts of EMIR and a gap analysis. This provided senior management with a clear overview of the impact of EMIR and the work needed to adhere to regulations.
  • Additional business-as-usual manpower costs were quantified, including extra costs for using third-party reconciliation systems.
  • The client was provided with sufficient information to
    • draft a detailed document capturing business requirements
    • pull together a high-level IT plan including any necessary ‘on boarding’ actions
  • The project also highlighted areas of continued uncertainty within the regulations and their likely impact (e.g. the lack of a list of EEA equivalent exchanges)