EMIR REFIT: from regulatory compliance to Data Governance excellence
Historically, regulatory reporting was largely about completing required fields: what data does the regulator require, in what format and by when? It was a relatively linear process. However, EMIR REFIT has changed this approach. Reporting is no longer simply an administrative requirement; it has become a significant challenge for firms, requiring them to manage data with far greater rigour.
The introduction of this regulation has not only changed the information that must be reported on derivatives, but has also strengthened validation and reconciliation mechanisms, making data a fundamental component of effective regulatory reporting. In fact, ESMA (the European Securities and Markets Authority) identifies validation and reconciliation as key elements in ensuring the quality of reported information.
The challenge is no longer simply to report more data, but to ensure that this information is consistent, traceable and reliable for regulators.
EMIR REFIT Phase 2: new reconciliation fields
The introduction of the new reporting framework in April 2024 brought several significant changes, including the adoption of the ISO 20022 XML standard and new validation and reconciliation rules.
In April 2026, the second phase of the reconciliation regime under EMIR REFIT came into effect. This phase added 61 additional fields to the reconciliation process, each subject to the criteria and, where applicable, tolerances established by ESMA.
At first glance, this may appear to be simply an increase in the number of fields that need to be monitored. However, the real impact lies in the fact that the more data points are compared between counterparties, the more important it becomes to understand why those data points match — or why they generate breaks.
A discrepancy can have multiple causes. It may be related to data received from a particular source, a reference used to calculate a price, a timing difference or even the way in which two entities interpret and report a specific piece of information.
Therefore, to reduce the number of breaks, it is essential to understand why they occur. The objective should not simply be to resolve an individual discrepancy, but also to identify its root cause and establish measures to prevent it from recurring.
Data Governance challenges under EMIR REFIT
Not all data used in regulatory reporting originates within the reporting process itself. Some data depends on identifiers, classifications, currencies, product characteristics or specific attributes relating to individual markets.
As a result, Data Governance faces three critical challenges:
- Data lineage: we need to be able to trace the data throughout its lifecycle, identify its source and, when necessary, reconstruct the transformations it has undergone before reaching the final report.
- Excellence in unified master data: some breaks may originate from master data that is not aligned between counterparties. It is therefore important for fields such as the LEI, beneficiary identifier or product classifications to be subject to appropriate controls and update processes that ensure consistency.
- Data ownership: with a reporting model comprising up to 203 reportable fields, clearly defining responsibility for each one is essential. It is not enough to know who enters or transmits the information; organisations must also establish who is accountable for its definition, quality and correct transformation through to the final report.
An organisation capable of ensuring data traceability, keeping master data up to date and clearly defining data ownership will be better equipped to resolve breaks and, importantly, implement measures designed to reduce them.
Breaks as an indicator of data quality
From a regulatory perspective, a trade is considered reconciled when the values reported by both counterparties for the fields subject to reconciliation meet the criteria and tolerances established by ESMA.
From an operational perspective, however, reconciliation can provide much more: breaks can serve as a window into the quality of an organisation’s data.
For example, two counterparties may report the same trade using different data sources or exchange rates, resulting in a break. This discrepancy may be a one-off occurrence, but it may also point to a recurring issue.
If the same discrepancy appears repeatedly, resolving each break individually may address the symptom without correcting the underlying cause.
Being able to identify the source of a break and analyse the quality of the data involved can help improve future reconciliations. Furthermore, the insights gained can be used to take action before the data reaches the reporting process.
Strategies for reducing breaks under EMIR REFIT
Reducing breaks is not simply a matter of taking action once a discrepancy has occurred. It also requires processes that make it possible to anticipate errors and improve data quality before submission.
- Pre-reconciliation (pre-matching): if we wait for the Trade Repository to identify a reconciliation issue, we are already responding to a discrepancy that has occurred. As an operational best practice, pre-reconciliation processes can be established to review and compare data before submitting the information to the Trade Repository.
- Automation tools: compared with the traditional approach of investigating errors row by row using spreadsheets, automation makes it possible to identify patterns, group recurring breaks and facilitate their analysis and resolution.
- Establishing valuation standards: sharing product calculation and valuation methodologies and maintaining proactive communication with counterparties can play a key role in preventing issues. The inclusion of valuation fields in the reconciliation process makes the consistency of the criteria used by both counterparties particularly important. Differences in sources, inputs or valuation methodologies can result in different reported values and generate breaks when the applicable criteria or tolerances are exceeded.
EMIR REFIT and the future of data-quality-driven regulatory reporting
EMIR REFIT has changed the way we understand regulatory reporting: it can no longer be viewed solely as a compliance obligation, but also as a reflection of the quality and maturity of an organisation’s Data Governance framework.
Firms need to be able to understand where their information comes from, ensure its quality, define clear ownership and analyse the root causes of breaks. This will enable them not only to resolve current discrepancies, but also to anticipate future errors.
In this context, turning breaks into a source of insight and continuous improvement can help build more efficient, traceable and sustainable reporting processes.
As we have seen throughout this article, data quality is becoming increasingly important to regulatory authorities, which are placing greater emphasis on the consistency, traceability and reliability of reported information.
For financial institutions, this represents a challenge where ARENA can bring its financial-sector expertise and in-depth knowledge of reporting and reconciliation processes, helping organisations identify where breaks occur, understand what lies behind them and improve the processes that generate the information ultimately reported.
