EMIR – Risk mitigation techniques for bilateral settlement of OTC derivative contracts

What risk-mitigation techniques are mandatory under Commission Delegated Regulation (EU) No 149/2013?

• Timely confirmation: the conditions governing the OTC derivative contract must be confirmed in good time.
  
  
• Portfolio reconciliation
  
  
• Portfolio compression
  
  
• Procedure for dispute resolution
  
  
• Mark-to-market valuation
  
  
• Appropriate exchange of collateral and capital funding
  
  
• Unconfirmed trades: banks, insurers, reinsurers, pension funds and premium pension institutions must have procedures in place allowing them to notify DNB on a monthly basis of the number of unconfirmed OTC derivative transactions outstanding more than five business days (from the moment these transactions should have been confirmed pursuant to EMIR). The notification form for unconfirmed transactions can be found on this page under 'Downloads'.
  
  
• Obligation to notify DNB of disputes: Banks, insurers, reinsurers, pension funds and premium pension institutions must notify DNB of any disputes with counterparties about OTC derivative contracts, the valuation of such contracts, or the exchange of collateral. This concerns disputes representing a minimum value of €15 million, which have not been resolved within fifteen business days. Please note that this only relates to disputes relating to non-centrally cleared OTC derivative transactions. The dispute notification form is available under 'Downloads'.
  
  
• Validation of initial margin models: EMIR 3 requires counterparties to seek approval and validation for the use of initial margin models (IM models). Existing IM models will remain in use now that EMIR 3 has entered into force. Financial and non-financial counterparties that are currently subject to the requirement to exchange initial margin (link) must apply for a licence as soon as possible after making a change (including recalibration) to their existing IM models, regardless of the materiality of such a change. The licence application form can be found at the bottom of this page under 'Downloads'.  

The notification form for unconfirmed transactions can be found under ‘Downloads’. The dispute notification form is also available under 'Downloads'. You can submit the completed form to DNB, stating the name of your contact or supervisor, at toezichtsloket@dnb.nl  or directly to your supervisor. You can find more information on secure emailing on our website.