Urgent - response required by 30 April 2014
Dear Sir or Madam,
We contacted you previously about how we propose to address the above European Market and Infrastructure Regulation ("EMIR") requirements (the "EMIR Risk Mitigation Requirements"). This letter serves as a reminder that we urgently need you to complete documentation to ensure compliance with the EMIR Risk Mitigation Requirements.
This reminder is prompted by a recent pronouncement by our lead regulator – the UK Financial Conduct Authority ("FCA"). The FCA expects firms to demonstrate compliance with the EMIR Risk Mitigation Requirements by 30 April 2014. This is a hard deadline and we request your assistance to meet this date. The EMIR Risk Mitigation Requirements and the actions that are required by you aresummarised below.
You may have previously received an equivalent communication from our affiliate, Barclays Capital Securities Limited, in relation to the EMIR Risk Mitigation Requirements applicable to your relationship with Barclays Capital Securities Limited. Please could you take the below requested actions in relation to the EMIR Risk Mitigation Requirements applicable to your relationship with Barclays Bank PLC.
Actions Required by You
EMIR requires us to agree arrangements in writing for handling the EMIR Risk Mitigation Requirements relating to Portfolio Reconciliation and Dispute Resolutions. There are three ways to comply with these EMIR Risk Mitigation Requirements:
As a reminder, the ISDA March 2013 DF Protocol plus the DF Protocol Extension is our preferred method of compliance for all counterparties that are classified as a US Person including any Guaranteed Affiliate or Conduit Affiliate of a US Person.
Portfolio Reconciliation Requirements
All EU entities that use OTC derivatives are required to reconcile their portfolios of outstanding trades with each of their counterparties to ensure that any discrepancies can be identified and addressed. We need to apply portfolio reconciliation to equivalent entities outside of the EU. The reconciliation frequency depends on your classification (for example, Non Financial Counterparties under the clearing threshold ("NFC-s") reconcile less frequently than those above the clearing threshold ("NFC+s")), and increases with the number of trades (see the linked "Derivative Regulation – FAQs" for further detail).
Dispute Resolution Requirements
EMIR mandates that we have agreed procedures and processes to identify, record and monitor disputes relating to contract recognition or valuation and exchange of collateral, and to resolve disputes in a timely manner. Again, this applies to uncleared OTC derivative contracts only.
EMIR Counterparty Classification
As a reminder, separately, your assistance is requested to confirm your counterparty classification related to EMIR. Please inform us of your EMIR classification even if you are based outside the EU. There are three ways to provide us with this classification:
- ISDA has launched a new, online solution via Markit to assist your timely submission; ("ISDA Amend"); or
- Adhere to the "ISDA EMIR NFC Representation Protocol"; or
- Complete the Barclays classification form by using this form here.
(If you are acting on behalf of funds or of other legal entities, or other entities such as sub funds or pooled entities that the EMIR obligations may apply to, please complete a separate classification form on behalf of all those legal or other entities that you are acting for).
Your classification is required to accurately apply the provisions of EMIR, including the above described EMIR Risk Mitigation Requirements, as well as those relating to timely confirmations, reporting, clearing, and also for Basel III capital requirements. If you do not provide us with your classification, we may take a more conservative approach in applying these requirements to our trading relationship than would otherwise be necessary, which may have unfavourable implications from a burden of compliance and pricing perspective.
If you have not previously submitted any of the documents listed above, we require your submission by no later than 30 April 2014 and, if possible, well in advance of this deadline to ensure that there is no interruption to trading.
As with all legal matters, please consult your own legal advisors on the implications of adhering to any of the ISDA protocols, signing the bilateral amendment agreement or the DF Protocol Extension or providing information in respect of your counterparty classification.
Thank you in advance,
Barclays Bank PLC