UK firms are largely behind in their plans to comply with the EU’s EMIR Refit transaction reporting regulation, which comes into effect April 29, 2024. Moreover, they are finding the increased technological complexities introduced by the update particularly challenging.
These are among the main findings of a survey conducted by Novatus Advisory on readiness for the EMIR Refit among UK regulated entities. The survey explored the expected impact of the regulatory update from the perspective of 100 transaction reporting decision-makers.
The research – conducted in the fourth quarter of 2022 – was undertaken after the announcement of the April 2024 go-live date but before the release of guidelines and technical documentation by the European Securities Markets Authority (ESMA). It found that despite the announcement of the go-live date, many firms were behind the curve in their preparations, with 21% of respondents unsure of what will be required in practice.
The Novatus survey found that a significant number of respondents have no action plan in place, despite the go-live date being just over a year away. Of those who plan to manage the reporting process themselves, 37% currently have no action plan while 3% started considering the requirements.
According to Novates, 40% of regulated firms have no plan in place, and run the risk of being unready or noncompliant when the regulation goes live. Some 56% of respondents said they believed that 18 months is enough time for implementation.
These firms may struggle when it comes to dealing with the technological challenges of the EMIR Refit, which the Novatus research found to be a major concern among survey respondents. Under the revised EMIR rules, the number of reporting fields is increasing from 129 to 203, which will require firms to put in place a robust technical solution to ensure data is being consumed and reported accurately. The regulation is also introducing a requirement to use an automated XML reporting solution based on the ISO 20022 schema, adding to the technological challenge.
Elsewhere, the research suggested that firms risk spending a significant amount of time and money remediating issues if they fail to put in place a fully tested technological solution by the go-live date. This was the case with the last update to the existing EMIR rules back in late 2017, Novatus says, which forced 90% of respondents to review or assess how they report, with 76% still undertaking ongoing remediation. In short, if firms are unprepared and don’t have technology in place, there is a real risk that remediation will become a considerable (and costly) long-term problem.
Finally, the research found that a large number of firms are turning to external providers for support with their EMIR Refit implementation. Firms are adopting different approaches, with 59% intending to self-report and 41% planning to delegate to third-parties. Of those self-reporting, 68% still intend to use external providers for assurance that what they are doing is correct. Of those delegating, 76% say that their broker requires external support.
According to Novatus, this suggests there is a much wider ecosystem of providers across EMIR Refit, and also demonstrates that firms feel they don’t have the necessary expertise, knowledge or people to deliver the required changes.
The research – EMIR Refit: The current state of play – is available for free download from the Novatus website.
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