Delegation of the OTC reporting obligation to banks ...

Many corporates plan, for what at first sight might appear to be perfectly logically reasons, to delegate their OTC reporting to banks. In corporate groups (but not only for these), we see a couple of problem areas here:

Internal transactions

The possibility of banks reporting internally concluded transactions to a Repository can be excluded; these will have to be reported directly by the corporates themselves. 

Transaction parameters - what the authorities also want to know

ESMA has defined the contents and parameters for a report to a Repository. If you report these yourself, you will need to select from 85 fields which are the 'right' ones for your report.

You wouldn't have to deal with this if you delegated the reporting obligation to banks. Sound great? Unfortunately, there's more to it than that.

Among others, the following parameters have to be sent to the Repository with every message: 

Directly linked to commercial activity or treasury financing

– this somewhat vague term addresses the question of whether the transaction is a hedge as defined by EMIR. If you delegate the reporting obligation to your banks, you will have to inform the respective bank in the case of every single transaction whether this relates to a hedge or not. 

Do you really want to inform your bank which of your derivatives are (in part) speculative in nature? Either way, your bank won't be able to assess this and will be dependent on the details you provide.

Clearing threshold

– this is where you define whether your company is above or below the clearing threshold. Given that your bank cannot know this, it will want to be informed about this in connection with every single transaction.

Trading capacity

– this is also a mandatory field for reporting to the Repository. This is where you need to provide details of whether you, as a corporate, have entered into a transaction on your own account or on behalf of another party, e.g. for a subsidiary.