Is the financial industry ready for EMIR REFIT rules in 2024?


A recent study conducted by Novatus Advisory has revealed concerns about the preparedness of UK businesses for the upcoming EMIR REFIT rules in 2024.

The research involved 100 decision-makers responsible for transaction reporting, aiming to understand the challenges and concerns these firms have regarding the implementation of the new regulations.

The research, conducted during Q4 2022, took place after the EU go-live date of 29 April 2024 was announced but before the European Securities and Markets Authority (ESMA) released its guidelines and technical documentation clarifying the EMIR REFIT rules. Four key areas of focus were identified in the responses received.

Firstly, many firms appear to be behind the curve in terms of preparedness for the new rules, despite the EU go-live date being announced. Although all surveyed participants have read the requirements, 21% remain unsure about what will be required in practice. Alarmingly, a significant number of respondents have no action plan in place.

Among those who plan to manage the reporting process themselves, 37% have considered the requirements but have no action plan, while 3% haven’t even started considering the requirements. This means that two in five firms lack a plan, putting them at risk of non-compliance or rushing implementation and making mistakes.

Secondly, the technological challenges posed by the new rules are complex. The number of reporting fields will increase from 129 to 203, requiring robust tech solutions to ensure accurate data consumption and reporting. The mandatory use of an automated XML reporting solution using ISO 20022 schema adds to this complexity. The volume of new data fields and the scale of the required tech build were identified as the two largest challenges businesses face.

Thirdly, there is a risk of remediation for firms that fail to meet the requirements or do not have the technology in place by the EU go-live date. The research shows that this is already an issue under existing EMIR rules, with 90% of respondents having to review or assess their reporting since the updated rules came into force in late 2017. A staggering 76% are still undertaking ongoing remediation. If businesses are unprepared and lack the necessary technology, remediation could become a costly, long-term problem.

Finally, many firms are seeking external support for EMIR REFIT implementation. Of the respondents, 59% intend to self-report, while 41% plan to delegate to third parties. However, even among those self-reporting, 68% plan to use external providers for assurance. Additionally, 76% of those delegating say their broker requires external support. This highlights a wider ecosystem of providers across EMIR REFIT and indicates that firms feel they lack the expertise, knowledge, or resources to deliver the required changes.

In conclusion, the upcoming EMIR REFIT rules present significant challenges for businesses. With the go-live date approaching, it is crucial for affected firms to prioritize preparation to ensure compliance and avoid costly remediation processes.

You can download the full report here.

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