Totally agree with tw, competition is crucial. Althougha as far as I know, EUR market for Bermudan is not too wide, I always match with the same 3 or 4 counterparties.
As for collateral (again as far as I know) bermudans are all bilateral, therefore we both report our MTM to each other and start "litigations" only when there's a substantial difference ( > 15% of the Delta sensitivity as I recall). So we agree on MTM not on models. Litigations may end up requiring a third party to compute the MTM but I've never end up that far.
It is the reporting the MTM bit that always for a bit of cynical amusement...
The number of times (in illiquid instruments) I've seen both counterparts mark positive day one MTM, or it kicks of a massive argument in
terms of gouging accusations, or creates a lot of hurt pride and bad sales relationships.
The (best kept nameless) US bank I worked for had a way of "amortizing" day one P&L for client biz.
But this was in the pre-crash era....