Response to joint Consultation on draft RTS on risk-mitigation techniques for OTC-derivative contracts not cleared by a CCP

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Question 2. Are there particular aspects, for instance of an operational nature, that are not addressed in an appropriate manner? If yes, please provide the rationale for the concerns and potential solutions.

Our response focuses on the operational issues that will arise from the current rules. In particular we focus on those that will prevent market access, or create operational burden without systemic risk reduction.

Question 4. In respect of the use of a counterparty IRB model, are the counterparties confident that they will be able to access sufficient information to ensure appropriate transparency and to allow them to demonstrate an adequate understanding to their supervisory authority?

We feel that the protection of proprietary information will mean that IRB approaches are very difficult to use in practise, giving rise to many disputes. Therefore we expect most participants to fall back to ECAIs

Question 6. How will market participants be able to ensure the fulfilment of all the conditions for the reuse of initial margins as required in the BCBS-IOSCO framework? Can the respondents identify which companies in the EU would require reuse or re-hypothecation of collateral as an essential component of their business models?

We believe that other jurisdictions may allow rehypothecation in a way that will work, and therefore we suggest that an outright ban in the EU is not appropriate.

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Name of organisation

Barclays