What Changed
- The EBA published a consultation paper defining regular reporting requirements for counterparties seeking validation for ISDA SIMM under EMIR as amended by EMIR 3.
- The proposal integrates proportionality rules, requiring firms with less significant OTC trading activities to report data only once a year.
- Public comments are open until 2 November 2026, preceding planned EBA Decision adoption by end-2026 and initial data collection in Q1 2028.
Financial and non-financial counterparties trading non-centrally cleared over-the-counter (OTC) derivatives and seeking validation to use the ISDA Standard Initial Margin Model (SIMM) face new proposed reporting requirements following a public consultation launched by the European Banking Authority (EBA).
**Legal Background and Mandate**
Regulation (EU) No 648/2012 (EMIR), as amended by Regulation (EU) 2024/2987 (EMIR 3), introduced updated requirements for models used to calculate initial margin for non-centrally cleared OTC derivative contracts. Under Article 11(12a) of EMIR, the EBA is mandated to centrally validate elements and general aspects of pro forma models used by financial and non-financial counterparties subject to initial margin requirements. ISDA SIMM qualifies as a pro forma model under this provision, and the EBA's central validation function became operational on 1 March 2026.
**Proposed Framework and Proportionality**
The proposed framework establishes a standardized set of regular reporting requirements for counterparties seeking validation to use ISDA SIMM. Data collected under this framework will enable the EBA to perform central validation, monitor model performance on an ongoing basis under EBA Decision EBA/DC/610, and calculate annual validation fees under the related Delegated Act. The reporting will also assist national competent authorities in authorizing and supervising the use of these initial margin models.
To ensure proportionality and minimize compliance costs, firms with less significant OTC trading activities will be subject to substantially lighter reporting requirements, requiring reporting only once a year. The EBA will collect information directly from reporting entities, with operational arrangements to be communicated later to onboarded entities.
**Consultation Deadline and Implementation Timeline**
- Public Consultation Deadline: Comments may be submitted until 2 November 2026.
- Decision Adoption: The EBA intends to adopt a Decision establishing the reporting framework by the end of 2026.
- Technical Package: Requirements will be incorporated into EBA technical package version 4.4, Phase 2, expected in March 2027.
- First Reference Date: Expected to be December 2027.
- First Data Collection: Expected in the first quarter of 2028.
Who May Be Affected
Financial counterparties and non-financial counterparties in the EU using or seeking to use ISDA SIMM for initial margin calculations on non-centrally cleared OTC derivative contracts, as well as competent supervisory authorities.
Cross-Border Context
Applies at the EU level to financial and non-financial counterparties entering into non-centrally cleared OTC derivative contracts subject to EMIR initial margin rules.
What to check next
- Monitor EBA consultation updates ahead of the 2 November 2026 deadline.
- Track the adoption of the EBA Decision establishing data collection expected by the end of 2026.
- Follow the release of EBA technical package version 4.4, Phase 2, expected in March 2027.
This article provides general information and does not constitute legal advice. Consult the official text and obtain advice appropriate to your circumstances where needed.
Prepared automatically with AI assistance from the official sources linked on this page. Translations and explanations do not replace the official text.