Communication NBB_2020_048 / EMIR Inquiry Observations and Bank Expectations

NBB_2020_048 – December 22, 2020 Communication – Page 1/2 boulevard de Berlaimont 14 – BE-1000 Brussels tel. +32 2 221 38 12 company number: 0203.201.340 RPM Brussels www.bnb.be

Communication
Brussels, December 22, 2020
Reference: NBB_2020_048 your contact:
Rita Tam tel. +32 2 221 45 16 rita.tam@nbb.be

EMIR Inquiry Observations and Bank Expectations

Scope
Credit institutions, insurance and reinsurance undertakings, brokerage firms, payment institutions, and Belgian resolution bodies (hereinafter "the institutions"), as defined in Article 2, paragraphs 8 and 9 of Regulation (EU) No 648/2012 of the European Parliament and of the Council of 4 July 2012 on OTC derivatives, central counterparties and trade repositories (hereinafter the "EMIR Regulation" or "EMIR").

Summary/Objectives
By this communication, the Bank informs the institutions of the findings it observed within the framework of the EMIR inquiry and sets out its expectations for all institutions regarding the measures to be implemented to ensure compliance with the obligations resulting from the EMIR Regulation.

Madam, Sir,

The National Bank of Belgium conducted an inquiry in 2020 to assess the level of compliance of 15 Belgian financial institutions with the EMIR Regulation.

These 15 institutions were selected based on the materiality of their derivatives portfolio and their intermediary role under EMIR. The sample consists of 7 credit institutions, 2 brokerage firms, and 6 insurance undertakings.

The assessment was carried out based on the responses provided by the institutions to the inquiry questionnaire, their EMIR procedures and internal control reports, as well as data available in prudential reporting and trade repositories. The institutions were informed individually of the conclusions.

Communication – Page 2/2 NBB_2020_048 – December 22, 2020

EMIR imposes three major obligations on market counterparties holding any form of derivatives. These products are listed in Section C (points 4 to 11) of Annex I to Directive 2014/65/EU of the European Parliament and of the Council of 15 May 2014 on markets in financial instruments (the so-called "MiFID II" Directive).

• Obligation to report all derivative contracts to a trade repository recognized by ESMA (Article 9 EMIR).
• Obligation for central clearing of OTC derivative contracts declared subject to this obligation by ESMA (Article 4 EMIR)
• Obligation to apply risk mitigation techniques for OTC derivative contracts not cleared by a central counterparty (Article 11 EMIR), such as confirmation, daily valuation, reconciliation, and exchange of collateral (footnote 3).

This communication summarizes the main observations arising from this assessment and aims to improve the quality of the measures put in place by all supervised institutions to respect the obligations required by EMIR, by sharing knowledge on best practices and articulating the Bank's expectations, which address all supervised institutions. The Bank expects that the recommendations will be implemented by the end of September 2021.

The Bank will continue to monitor the level of compliance of supervised institutions with respect to EMIR by initiating other control actions in the future.

A copy of this communication is sent to the auditor(s), approved auditor(s) of your institution.

Please accept, Madam, Sir, the expression of our distinguished salutations.

Pierre Wunsch
Governor

Annexes:

1. Description of inquiry observations and recommendations
2. Summary table

1 TR reporting standards: Delegated Regulation (EU) 2017/104 of the Commission of 19 October 2016 2 EMIR RTS on instruments subject to clearing obligation: IRS (EUR, GBP, JPY and USD) Official Journal 2015/2205; IRS (NOK, SEK, PLN) Official Journal 2016/1178; Index CDS Official Journal 2016/592 3 EMIR RTS on Risk mitigation techniques on not-centrally cleared OTC derivatives: Delegated Regulation (EU) No 149/2013 of the Commission of 19 December 2012 and Delegated Regulation (EU) 2016/2251 of the Commission of 4 October 2016