Dear,
Some months ago, we were required to prepare an analysis of the implications of using Bank Analyzer as a central repository, for fulfilling the reporting requirements of the European Market and Infrastructure Regulation and Dodd-Frank Act for a Bank subject to both regulations.
Dodd-Frank in the US and EMIR in Europe are the result of the G20 summit mandate on September 2009, requesting the Over the Counter Derivatives Market to be regulated, in order of enhancing transparency and reducing systemic risk in the Financial System.
They have similarities; both EMIR and Dodd-Frank include clearing transaction, and risk mitigation provisions reporting requirements, that apply to financial and non-financial firms trading derivative contracts.
But EMIR and Dodd-Frank have also some differences that must be considered when it comes to evaluate the SAP Bank Analyzer capabilities to help a Bank to be compliant with them.
The first difference is in the scope; EMIR only applies to derivatives not cleared in Central Counterparty Clearing Houses, while Dodd-Frank is also applicable to swaps cleared in designated clearing organizations.
Dodd-Frank and EMIR definitions of Swaps and Derivatives are not fully coincident; consequently the reporting requirements for them are different under Dodd-Frank and EMIR.
Intra-group transactions are in scope for Dodd-Frank while EMIR establishes some exceptions to the reporting of transactions with affiliates.
EMIR is only applicable to transactions with counterparties legally established in the EU while Dodd-Frank has broader cross-border application.
The second important difference is reconciliation; US Commodity Futures Trading Commission requires exchange of valuation in all cases while EMIR establishes some exceptions to it.
Other important differences are the requirements for documenting the relationship with the client which are much more detailed for the US-Commodity Futures Trading Commission than for the European Union regulation.
Finally the US-Commodity Futures Trading Commission includes specific and detailed record keeping requirements while the European regulation does not.
From a technical perspective, the multilayer architecture of Bank Analyzer (Source Data Layer, Process and Methods Layer, Results Data Layer and Analytical Layer) offers us strong functionalities for covering the reporting requirements of multiple regulations as in this case.
As in many other consultancy analyses, there is more than one approach for looking at the problem, in this particular case our proposal was the following.
Regulation is dynamic and it can change, particularly in very new regulation like Dodd-Frank and EMIR. Consequently selection functions of the transactions in scope for EMIR or Dodd-Frank shouldn’t be contained in the SDL. The SDL is a representation of the facts represented in the Transactional System, while regulations (EMIR, Dodd-Frank or others) are just an interpretation of the facts.
Consequently our advice was to build the selection function as part of a PML process that could be run separately for preparing the EMIR or Dodd-frank regulatory requirements according to the particular selection criteria (index function) of the contracts in scope for them.
Additionally, this approach gives us the flexibility of enhancing the transaction data according to the different requirements of EMIR and Dodd-Frank Act.
Finally the proposal included building two separated Results Data Areas on the Results Data Layer for storing the data before is extracted to SAP Business Intelligence; improving the performance of the system and containing the full set of data required by every regulation.
Finally the data is extracted to SAP Netweaver-Business Intelligence. Finally, it can be exported to external systems using the functionalities of the Open Hub Service.
Looking forward to read your opinions.
K. Regards.
Ferran.
Some months ago, we were required to prepare an analysis of the implications of using Bank Analyzer as a central repository, for fulfilling the reporting requirements of the European Market and Infrastructure Regulation and Dodd-Frank Act for a Bank subject to both regulations.
Dodd-Frank in the US and EMIR in Europe are the result of the G20 summit mandate on September 2009, requesting the Over the Counter Derivatives Market to be regulated, in order of enhancing transparency and reducing systemic risk in the Financial System.
They have similarities; both EMIR and Dodd-Frank include clearing transaction, and risk mitigation provisions reporting requirements, that apply to financial and non-financial firms trading derivative contracts.
But EMIR and Dodd-Frank have also some differences that must be considered when it comes to evaluate the SAP Bank Analyzer capabilities to help a Bank to be compliant with them.
The first difference is in the scope; EMIR only applies to derivatives not cleared in Central Counterparty Clearing Houses, while Dodd-Frank is also applicable to swaps cleared in designated clearing organizations.
Dodd-Frank and EMIR definitions of Swaps and Derivatives are not fully coincident; consequently the reporting requirements for them are different under Dodd-Frank and EMIR.
Intra-group transactions are in scope for Dodd-Frank while EMIR establishes some exceptions to the reporting of transactions with affiliates.
EMIR is only applicable to transactions with counterparties legally established in the EU while Dodd-Frank has broader cross-border application.
The second important difference is reconciliation; US Commodity Futures Trading Commission requires exchange of valuation in all cases while EMIR establishes some exceptions to it.
Other important differences are the requirements for documenting the relationship with the client which are much more detailed for the US-Commodity Futures Trading Commission than for the European Union regulation.
Finally the US-Commodity Futures Trading Commission includes specific and detailed record keeping requirements while the European regulation does not.
From a technical perspective, the multilayer architecture of Bank Analyzer (Source Data Layer, Process and Methods Layer, Results Data Layer and Analytical Layer) offers us strong functionalities for covering the reporting requirements of multiple regulations as in this case.
As in many other consultancy analyses, there is more than one approach for looking at the problem, in this particular case our proposal was the following.
Regulation is dynamic and it can change, particularly in very new regulation like Dodd-Frank and EMIR. Consequently selection functions of the transactions in scope for EMIR or Dodd-Frank shouldn’t be contained in the SDL. The SDL is a representation of the facts represented in the Transactional System, while regulations (EMIR, Dodd-Frank or others) are just an interpretation of the facts.
Consequently our advice was to build the selection function as part of a PML process that could be run separately for preparing the EMIR or Dodd-frank regulatory requirements according to the particular selection criteria (index function) of the contracts in scope for them.
Additionally, this approach gives us the flexibility of enhancing the transaction data according to the different requirements of EMIR and Dodd-Frank Act.
Finally the proposal included building two separated Results Data Areas on the Results Data Layer for storing the data before is extracted to SAP Business Intelligence; improving the performance of the system and containing the full set of data required by every regulation.
Finally the data is extracted to SAP Netweaver-Business Intelligence. Finally, it can be exported to external systems using the functionalities of the Open Hub Service.
Looking forward to read your opinions.
K. Regards.
Ferran.
