Central Bank of Ireland Data Quality and EMIR Refit Update

Central Bank of Ireland EMIR Refit 12 October 2023 Central Bank of Ireland - CONFIDENTIAL

2 Data Quality CBI Message to Industry Central Bank Strategic Plan Our Strategy Under Transforming, our focus is on an ambitious reimagining of how our organisation operates, with an emphasis on effectiveness and increased agility, in a new hybrid- working model. The role of data and technology in driving effective and efficient processes and supporting our people to deliver on their roles is central to this. Change how we use data and analytics to drive our effectiveness as an intelligence-led organisation. Accelerate the evolution of our risk-based supervisory approach, such that it becomes more data-driven, agile and scalable Central Bank of Ireland - CONFIDENTIAL

3 Data Quality SMSD Message to Industry The quality of reported data was one of the key conduct risks called out in the Central Banks Securities Markets Risk Outlook Report in 2021, 2022 and 2023. Securities Market Risk Outlook Report 2023 Central Bank of Ireland - CONFIDENTIAL

4 Why is EMIR Data Quality so Important? EMIR is analysed and scrutinised across the EU in order to inform policy, supervision and research. Central Bank of Ireland - CONFIDENTIAL

5 SMSD Approach to EMIR Data Quality Monitor Analysis Results DQ Tests Q4 Quarterly Updates from Counterparties Prepare Internal Annual Report Identify Significant data quality issues Monitor for Improvements Firm Level Results Provide Results to Firms/ Board Responsibility EMIR overall results Engage where sufficient progress not made Central Bank of Ireland - CONFIDENTIAL

6 EMIR Provisional Data Quality Results To Date Name of Data Quality Test Name of Data Quality Test Outstanding Positions Blank Collateralisation Missing Valuations Missing Variation Margin Outdated Valuation Outstanding Transactions Client Codes Inconsistent Financial Sector Matching Pairing Default Maturity Duplicate Trades Inconsistent Counterparty Nature Blank or Abnormal Maturity Date Central Bank of Ireland - CONFIDENTIAL

7 EMIR Data Quality Key Messages Data Quality Data Quality is going to remain an area of focus and supervisory priority for the Central Bank and our European counterparts. Delegated Reporting: Where reporting is delegated, firms should have an appropriate level of oversight over the data reported to ensure it is being submitted correctly, including inter alia regular reporting from delegates and reconciliation of data reported it is not acceptable to solely rely on the delegate to ensure data quality. Industry Letter: Reminder of Central Bank s letter issued to industry in 2019 in relation to EMIR data quality. Central Bank of Ireland - CONFIDENTIAL

8 EMIR Refit Why?? Ensuring the full alignment of EU derivatives reporting with globally agreed recommendations, and in establishing the highest standards for data quality worldwide. (Source: Steven Maijoor, ESMA) EMIR Refit is about harmonization and improving data quality!!!! Between May and August 2015 the European Commission carried out an extensive assessment of the EMIR regulation. The review concluded that although there was no need for a fundamental change to the nature of the core requirements in EMIR, the legislation imposed disproportionate burdens and overly complex requirements on non-financial counterparties, small financial counterparties and pension funds. As a result EMIR was included in the European Commission Regulatory Fitness and Performance (REFIT) programme to address the issues that had been identified. Central Bank of Ireland - CONFIDENTIAL

9 EMIR Refit Background The EMIR Refit required ESMA to develop regulatory and implementing technical standards with respect to the reporting of derivatives to the Trade Repositories (TRs), registration of TRs, procedures to be applied by the TRs to reconcile and validate the data as well as publication and provision of data by the TRs to the relevant authorities. ESMA proposed to revise certain aspects of reporting to the TRs in order to align the reporting requirements in the EU with the global guidance on harmonisation of OTC derivatives data elements reported to TRs, as developed by the CPMI and IOSCO working group for the harmonisation of key OTC derivatives data elements. Central Bank of Ireland - CONFIDENTIAL

10 EMIR Refit The Headlines 1. Reporting under EMIR Refit commences from 29 April 2024. 2. Outstanding derivatives counterparties need to ensure that all outstanding derivatives are reported in line with the EMIR Refit reporting requirements within 180 calendar days after Go-Live 3. Field expansion significant increase in the number of fields. 4. XML adoption requirement for counterparties and Trade Repositories (TRs) to report and consume reports using ISO 20022 XML format. 5. UTI/UPI adoption alignment with Critical Data Elements (CDE) guidance. 6. Pairing and matching TRs are required to pair and match reports, identify and report exceptions to reporting counterparties. Central Bank of Ireland - CONFIDENTIAL

11 EMIR Refit Additional Points to Note Fund Manager is responsible for reporting the details of OTC derivative contracts entered into by a Fund. New field: Entity responsible for reporting (ERR) particularly relevant for Fund Managers. Optional fields should be reported, if relevant. Permissions TRs to verify the report submitting entity (RSE). Central Bank of Ireland - CONFIDENTIAL

12 EMIR Refit - Explicit Permissioning Two respondents asked ESMA to provide further clarifications on the process of authorization / permissions of a report submitting entity as per Article 1(1)(c) of the RTS on data quality. ESMA clarifies that it is not necessary for all reporting counterparties and ERRs to be onboarded to the TR to provide explicit permission that the RSE is authorized to submit reports on their behalf. Also, it is not necessary to provide the permission before every trade. The permissioning is expected to be a one-off action at the start of reporting on behalf of the reporting counterparty or ERR, as applicable, and the RSE should provide a contact to the reporting counterparty or ERR so that TR could receive the permission from them. - Guidelines on reporting under EMIR Refit, Paragraph 475 TRs need to verify the Report Submitting Entity (RSE). TRs must ask the reporting counterparty or entity responsible for reporting (ERR) that the report submitting entity (RSE) is allowed to report on their behalf. Central Bank of Ireland - CONFIDENTIAL

13 EMIR Refit Key takeaways EMIR Refit What does the Fund Manager need to know/do Fund Managers need to engage with their Report Submitting Entities (RSEs) and their Trade Repositories (TRs) to ensure that the funds under their management are in a position to commence reporting for Go Live (29 April 2024). Fund Managers also need to be comfortable that their RSEs will be in a position to update all outstanding derivatives within 180 days of Go Live. Reminder about permissions TRs require explicit permissioning from the Entity Responsible for Reporting (ERR) / Counterparty before a RSE can commence reporting. Ultimate responsibility for reporting under EMIR Refit lies with the Fund Manager. Central Bank of Ireland - CONFIDENTIAL

14 EMIR Refit - Reference Documents Counterparties and ERRs (including Fund Managers) will need to take into account the following: Guidelines on reporting under EMIR Refit (applicable from 29 April 2024) - Guidelines on reporting under EMIR REFIT The validations rules applied by the TRs (updated on 6 September 2023, applicable from 29 April 2024) - Validation rules, reconciliation tolerances and template for notification of errors and omissions in reporting XML EMIR Reporting Schemas; Incoming messages (updated on 6 September 2023, applicable from 29 April 2024) o Outgoing messages (updated on 6 September 2023, applicable from 29 April 2024) o Mapping table (applicable from 29 April 2024) - Mapping table The Technical Standards (TS) on reporting and on the reconciliation and verification of data. Regulatory technical standards on reporting under EMIR REFIT (applicable from 29 April 2024) o Implementing technical standards on reporting under EMIR REFIT (applicable from 29 April 2024) o Regulatory technical standards on the reconciliation and verification of data (applicable from 29 April 2024) o Central Bank of Ireland - CONFIDENTIAL