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Risk mitigating obligations

EMIR comprises a number of risk mitigating obligations. These apply to OTC derivatives transactions that are not cleared centrally. Counterparties in OTC derivatives transactions need to have certain written agreements in place concerning these obligations.

What are the most important risk mitigating rules?

  • Timely confirmation of transactions

    EMIR contains specific guidelines for the timely confirmation (from both sides) of new OTC derivatives transactions. An OTC derivatives contract which is concluded with FCs, NFCs or NFCs+, and that is not cleared by a central counterparty (CCP) should as soon as possible, if possible electronically, be confirmed.

    Timelines for timely confirmation are dependent on the type of product and the time of conclusion. FCs must have the necessary procedures in place to report the number of unconfirmed OTC derivatives transactions that have been outstanding for more than five business days. This has to be done to the national competent authority on a monthly basis. For ABN AMRO this is De Nederlandsche Bank.

  • Reconciliation of portfolios

    EMIR obliges FCs. NFCs and NFCs+ to make sure that the data relating to the OTC derivatives portfolios match. The reconciliation of portfolios is the process in which the transaction data of both parties is compared to one another to check whether the data matches. The result of the reconciliation has to be that both parties agree to the portfolio overview.

    The frequency of the reconciliation depends on the number of outstanding OTC derivatives transactions.

  • Dispute resolution

    FCs, NFCs and NFCs+ entering into OTC derivative transactions should agree upon detailed procedures in relation to:

    • the recording of disputes relating to the recognition or valuation of the transactions 

    • the recording of disputes relating to the exchange of collateral 

    • the resolution of disputes in a timely manner with a specific process for those disputes that are not resolved within five business days.

    FCs are required to report to national competent authority (in the Netherlands: De Nederlandsche Bank (DNB) any dispute relating to an OTC derivatives contract which is not centrally cleared. The obligation applies to disputes relating to the valuation of the transaction or the exchange of collateral for an amount or a value higher than EUR 15 million that are outstanding for at least 15 business days.

  • Compression of portfolios

    EMIR prescribes that parties in OTC derivatives transactions have procedures in place that enable them to check twice a year whether it is possible to compress their portfolios. Compression leads to a lower credit risk on each other.

    Financial and non-financial counterparties that have entered into 500 OTC derivatives contracts or more with one counterparty and that are not obliged to clear centrally have to have a compression procedure in place.

  • Valuation of transactions

    FCs and NFCs+ in OTC derivatives transactions must value their positions on a daily basis using mark-to-market models, or mark-to-model. This obligation does not apply to NFCs. Mark-to-market means keeping track of the market value of an OTC derivatives contract, in order to calculate the losses or profits regarding the contract. Mark-to-model means using a financial model in order to calculate the value of a contract.

  • Initial and variation margin

    The margin obligations relate to collateral that parties have to deposit at each other in case of an OTC derivatives transaction that does not have to be cleared centrally. There are no definitive rules concerning these margin obligations yet. The obligation is supposed to enter into force in 2017. The margin obligations will only apply to FCs and NFCs+.

What do you and ABN AMRO have to agree on?

If you enter into or have entered into OTC derivatives transactions with ABN AMRO, EMIR requires you to make certain written agreements with us concerning EMIRs risk mitigating obligations. These agreements have to be confirmed in writing. There are several ways to do that:

What agreements do you make with ABN AMRO?

  • Agreements ABD

    If ABN AMRO's Algemene Bepalingen Derivatentransacties (ABD) apply to your transactions, you must accept the EMIR Terms. You can use the Signature Sheet EMIR Terms for Over-The-Counter (OTC) derivative transactions. Please complete the Signature Sheet EMIR Terms, have it signed by the authorized persons and return it to ABN AMRO.
     
    Postal address:
    ABN AMRO Bank N.V.
    c/o Markets Documentation Unit
    PAC: HQ7216
    Gustav Mahlerlaan 10
    1082 PP Amsterdam
    The Netherlands

    Email address:
    regulatory.reporting.operations@nl.abnamro.com 

  • Agreements ISDA Master Agreement

    • If you recently entered into an ISDA Master Agreement with ABN AMRO that sets out the EMIR agreements you don't have to do anything. 

    • If you entered into an ISDA Master Agreement with ABN AMRO before 2014 and have not yet made agreements concerning EMIR, there are two ways you can make these EMIR agreements with ABN AMRO:

      • You join the ISDA 2013 EMIR Port Rec, Dispute Res and Disclosure Protocol, or 

      • You sign the ISDA EMIR Amendment. You can request this document from your account manager or the Markets Documentation Unit (mdu@nl.abnamro.com