EMIR Refit to cause delays and risk of fines, says report
31 May 2022 Europe
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The upcoming European Market Infrastructure Regulation (EMIR) Refit could cause significant delays and run the risk of fines as regulations increase sell-side and investment firms’ reporting requirements, says an Acuiti study.
The report, which is sponsored by Broadridge and titled “EMIR Refit: Navigating the mandatory changes”, details how regulatory reporting teams face significant challenges in complying with the new regulation.
According to Acuiti, companies have found themselves operating with a lack of clarity on how the new framework will impact their reporting processes. This increases the risk of errors, which adds to the burden for teams when they have to explain breaks to regulators.
Acuiti found that 69 per cent of firms were expecting serious challenges when building up their matching, reconciliation and exception management capabilities.
All 40 sell-side firms surveyed for the study envisioned some level of challenge in correcting errors and resubmissions.
The study also highlights that firms are facing significant resource constraints in amassing the expertise and infrastructure to meet the challenges posed by EMIR Refit.
These constraints have added to the difficulties of controlling the amount of budget devoted to regulatory reporting, which can eat into other investment plans, says the report.
The findings highlight the importance of developing robust systems for trade and transaction reporting, and for the correction of errors.
Commenting on the study’s findings, Acuiti’s head of research Ross Lancaster says: “Regulatory reporting regimes have long been a slog to implement for firms, creating lots of potential cost with little to gain in competitive edge. EMIR Refit looks set to be no different, with compliance preparations still hindered by a lack of clarity on how the regulation will fit with other jurisdictions’ frameworks.
“Nevertheless, there is no alternative to upgrading or replacing systems for compliance. Firms will be well served by increasing their analytical capabilities to continuously assess what causes inevitable reporting errors and how to adjust processes accordingly. This can improve internal functionality while also minimising the risk of fines.”
Hugh Daly, general manager at Broadridge, adds: “Given the complexity and scope of reporting requirement changes that will impact industry participants over the next two years, firms face significant operational challenges in updating their systems to comply.
“This opens the door to innovation, with the opportunity to improve how reporting systems function from a more strategic, multi-jurisdictional or multi-regional perspective.”
The report, which is sponsored by Broadridge and titled “EMIR Refit: Navigating the mandatory changes”, details how regulatory reporting teams face significant challenges in complying with the new regulation.
According to Acuiti, companies have found themselves operating with a lack of clarity on how the new framework will impact their reporting processes. This increases the risk of errors, which adds to the burden for teams when they have to explain breaks to regulators.
Acuiti found that 69 per cent of firms were expecting serious challenges when building up their matching, reconciliation and exception management capabilities.
All 40 sell-side firms surveyed for the study envisioned some level of challenge in correcting errors and resubmissions.
The study also highlights that firms are facing significant resource constraints in amassing the expertise and infrastructure to meet the challenges posed by EMIR Refit.
These constraints have added to the difficulties of controlling the amount of budget devoted to regulatory reporting, which can eat into other investment plans, says the report.
The findings highlight the importance of developing robust systems for trade and transaction reporting, and for the correction of errors.
Commenting on the study’s findings, Acuiti’s head of research Ross Lancaster says: “Regulatory reporting regimes have long been a slog to implement for firms, creating lots of potential cost with little to gain in competitive edge. EMIR Refit looks set to be no different, with compliance preparations still hindered by a lack of clarity on how the regulation will fit with other jurisdictions’ frameworks.
“Nevertheless, there is no alternative to upgrading or replacing systems for compliance. Firms will be well served by increasing their analytical capabilities to continuously assess what causes inevitable reporting errors and how to adjust processes accordingly. This can improve internal functionality while also minimising the risk of fines.”
Hugh Daly, general manager at Broadridge, adds: “Given the complexity and scope of reporting requirement changes that will impact industry participants over the next two years, firms face significant operational challenges in updating their systems to comply.
“This opens the door to innovation, with the opportunity to improve how reporting systems function from a more strategic, multi-jurisdictional or multi-regional perspective.”
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