EBA publishes technical advice to EC on fees to validate pro forma models under EMIR

The European Banking Authority (EBA) has published technical advice to the European Commission, alongside a press release, on a possible Delegated Act concerning fees for the validation of pro forma models under the European Market Infrastructure Regulation (EMIR). EMIR, as amended by EMIR 3, requires that counterparties apply for authorisation to their competent authorities before using, or adopting a change to, a model for initial margin calculation used as a risk-mitigation technique for over-the-counter (OTC) derivative contracts not cleared by a central counterparty (CCP). The EBA is charged with establishing a central validation function for the elements and general aspects of pro forma models, and any changes to those. It must also charge an annual fee, per pro forma model, to counterparties using the pro forma models it validates.

The EBA proposes that the Delegated Act:

• Allows for the recovery of all costs, both direct and indirect, associated with the central validation function of pro forma models to be covered.
• Introduces simplified methodologies for calculating the 12-month average notional amount of non-centrally cleared OTC derivatives, to ensure proportionality and ease of implementation.
• Defines payment modalities and information requirements, including the data CCPs must provide to the EBA for fee determination and invoicing.

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