Managing regulatory compliance
After the collapse of various financial institutions such as Lehman Brothers in 2008, financial regulatory agencies have striven to implement mechanisms with a view to improving the management of financial institutions and reforming the financial markets. The EMIR and DFA regulations were put into place to increase market transparency and stability of OTC derivatives. These regulations introduce requirements for the counterparties that operate with these derivatives:
- The use of central counterparties (CCPs) to purchase certain OTCs
- Risk mitigation methods for bilaterally settled OTC derivatives
- Reporting of transactions
In this context, the client issues a call for tenders for specialist consultancy services, with a view to helping them ensure strict regulatory compliance with regard to the need to exchange Initial Margin on bilateral OTC derivative transactions. This can be calculated using the SIMM (ISDA) method and coordinated with the Market Risk Department, both as regards approving the solution and drafting documentation requested by the institution, regulatory bodies and auditors.
A comprehensive multidisciplinary service
The client opted to work with Common MS, given its specialist knowledge and prior experience with other leading financial institutions, both with the Murex application on a technical and functional level, and in the area of risks and regulatory compliance, as well as in collateral management. This project required a Risks and Regulation expert team that, in turn, boasted the technical knowledge to work with the system management department and the Murex provider. The project is managed under agile methodology with four sprints (design, implementation, approval and Go Live).
The implementation of this module required that the Risk and Systems departments work closely with the Murex provider. The implementation was completed without any delays and all deadlines set in the planning stage were met. Production began and the module was stabilised with no incidences. Common was selected for the subsequent phases of the project.