The EBA calls on financial and non-financial counterparties using an initial margin model based on ISDA SIMM to seek authorisation through their competent authorities

The European Banking Authority (EBA) today launched a data collection, through the competent authorities, to obtain the list of EU counterparties that will be required to apply to the EBA for validation of ISDA SIMM, as well as their contact persons. The EBA underscores the counterparties' obligation to apply for the authorisation of the use of initial margin models and warns of the legal consequences in case of non-authorised use under the European Market Infrastructure Regulation (EMIR).

All financial and non-financial counterparties exchanging initial margins (IM) calculated - directly or indirectly - using IM models based on ISDA SIMM should apply to their competent authorities for the authorisation of such models as per EMIR and the EBA's no-action letter published on 17 December 2024.

Counterparties must provide their competent authorities with the information requested. This information will be used to onboard counterparties onto the EBA's validation system during the first semester of 2026, ahead of counterparties' applications to the EBA for validation of ISDA SIMM expected in the second semester of 2026. 

Counterparties failing to apply for the EBA's validation will no longer be permitted to use ISDA SIMM under EMIR until they rectify their status with the EBA.

The EBA's no-action letter remains in force.

Legal basis, background and next steps

Financial and non-financial counterparties that are subject to the requirement to exchange initial margin in accordance with Article 36 of Commission Delegated Regulation (EU) 2016/2251 (the joint ESAs RTS on uncleared OTC derivatives) and use - directly or indirectly - the ISDA SIMM pro forma model to comply with such requirement, are required to request validation of ISDA SIMM by the EBA in accordance with Article 11(3) of EMIR, in order to carry on using that pro forma model. 

In addition, financial and non-financial counterparties using an IM model (based or not based on ISDA SIMM) are reminded of their obligation - if not done yet - to apply for authorisation to their competent authority under the regime introduced by the no action letter published on 17 December 2024. This process should be completed ahead of the entry into application of the ISDA SIMM v2.8+2506.

Counterparties that have not applied for authorisation from their competent authority will not be able to apply to the EBA for validation of ISDA SIMM in 2026. Counterparties that fail to apply for validation by the EBA will no longer be permitted to use ISDA SIMM until they rectify their status with the EBA. The EBA intends to publish the list of counterparties validated for the use of ISDA SIMM in the EU towards the end of 2026. Any infringement of the rules under Article 11(3) of EMIR may lead to penalties under Article 12 of EMIR.