Commission Delegated Regulation Supplementing EMIR by Specifying the Method for the Determination of Fees Charged by the EBA for the Validation of the Pro Forma Models

Why It Matters

The fee framework creates a transparent cost structure for EBA’s validation service, affecting banks and non‑financial firms that rely on pro forma models for collateral management. Its adoption will influence pricing, compliance workloads, and market liquidity in Europe’s OTC derivatives space.

Key Takeaways

• EBA to charge annual fees per pro forma model
• Fees based on counterparties' average notional amounts
• Regulation outlines cost‑estimation methodology for validation function
• Legacy model users face transitional fee schedule
• EU Council and Parliament must approve before enforcement

Pulse Analysis

The European Commission’s new Delegated Regulation tightens the financial infrastructure surrounding the European Market Infrastructure Regulation (EMIR). By prescribing a clear methodology for calculating the European Banking Authority’s (EBA) validation fees, the rule aims to standardise cost recovery for the central validation function that underpins pro forma models. These models are essential for determining collateral requirements on non‑centrally cleared OTC derivatives, a segment that still represents a sizable share of the European derivatives market. The regulation’s cost‑estimation approach ties fees to the average notional amount of each counterparty’s portfolio, ensuring that larger market participants shoulder a proportionate share of the validation expenses.

For banks, asset managers, and non‑financial corporates, the fee structure introduces a predictable expense line that can be incorporated into risk‑adjusted pricing and capital planning. Entities using legacy pro forma models will transition to a phased fee schedule, while newcomers face an initial fee tier that reflects the EBA’s onboarding costs. This differentiation encourages the adoption of newer, more risk‑sensitive models while mitigating the financial impact on firms that have already integrated older frameworks. Moreover, the regulation mandates detailed data submissions to the EBA, prompting firms to enhance their reporting infrastructure and data governance practices.

The next procedural hurdle is political: the EU Council and European Parliament must scrutinise and clear the Delegated Regulation. Assuming no objections, the rule will be published in the Official Journal and become effective 20 days later. Market participants should therefore monitor the legislative timeline closely, as any delay could affect budgeting cycles and the timing of model validations. In the broader context, the move signals the EU’s commitment to refining the collateral ecosystem, bolstering transparency, and aligning fee structures with the actual cost of regulatory services, which could set a precedent for similar frameworks in other jurisdictions.