EU’s IM model validation rules may put Simm in jeopardy

Draft RTS creates validation hurdles and cross-border conflicts, industry warns

Europlaza tower in Paris is home to the European Banking Authority
Europlaza tower in Paris is home to the European Banking Authority
Photo copyright: 11h45_Paris La Defense

Stringent validation requirements proposed by the European Union could deter some firms in the region from using the industry’s standard initial margin model (Simm) for non-cleared derivatives.  

Industry sources tell the draft regulatory technical standards (RTS) for initial margin model validation (IMMV) issued by the European Banking Authority (EBA) on November 4, set too high a bar for compliance and conflict with requirements in other jurisdictions.

The rules will require large

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