meta_id 2975303

On March 17, 2026, the European Banking Authority (EBA) published a consultation paper on draft regulatory technical standards (RTS) specifying supervisory procedures for the authorisation of initial margin (IM) models used by counterparties in non-centrally cleared over-the-counter (OTC) derivatives under Article 11(15) of the European Market Infrastructure Regulation (EMIR). The draft RTS establish supervisory procedures for both initial authorisation and ongoing monitoring of IM models. The standards apply to credit institutions and investment firms that have, or belong to a group with, a monthly average outstanding notional amount of non-centrally cleared OTC derivatives exceeding EUR 750 billion. The RTS introduces a central validation function for the European Banking Authority to validate pro forma models, such as the ISDA Standard Initial Margin Model (ISDA SIMM), before competent authorities can authorise their use at counterparty level. This central validation aims to promote consistency across the European Union, improve authorisation efficiency, and reduce operational duplication. The draft RTS covers both qualitative and quantitative requirements. Qualitative requirements address governance, senior management oversight, model development, audit processes, internal validation, information technology robustness, outsourcing arrangements, and documentation quality. Quantitative requirements address position completeness and accuracy, material risk factor inclusion across asset classes, treatment of maturity mismatches and non-linear dependencies, calibration procedures, adjustment mechanisms, data quality, proxy usage, and back-testing methodologies. The standards introduce a streamlined back-testing approach using a traffic light system to identify material model weaknesses. The RTS will apply in two phases: from January 1, 2028, for counterparties with aggregate average notional amounts exceeding EUR 2,250 billion, and from July 1, 2028, for counterparties with amounts between EUR 750 billion and EUR 2,250 billion. The consultation period closes on June 17, 2026. Following consultation feedback, the EBA will submit final RTS to the European Commission for adoption.