Margin Requirements for Uncleared Derivatives Delayed for Certain Counterparties
07/23/2019The target date at international level for regulators to introduce margin requirements for uncleared derivatives for counterparties with lower trading volumes has been extended for a year by the International Organization of Securities Commissions and the Basel Committee on Banking Standards. The amendment may, depending on regulatory responses, in turn impact small banks, asset managers, pension funds and insurers.
In March 2015, the Basel Committee and IOSCO published a revised version of their policy framework for the exchange of margin for uncleared derivatives. The main revisions were to delay by nine months the phase-in period for the obligations relating to both initial margin and variation margin. Relevant international standards apply to entities that are financial firms and systemically important non-financial entities, the definitions for which are determined by national regulation.
The revised phase-in of the requirements to post and collect initial margin for covered entities belonging to a group whose aggregate month-end average notional amount (AANA) of non-centrally cleared derivatives exceeds €8 billion is from September 1, 2021 (instead of September 1, 2020).
A new phase-in date from September 1, 2020 to August 31, 2021 is also being introduced for covered entities belonging to a group whose AANA of uncleared derivatives exceeds €50 billion.
There are no changes to the phase-in dates for covered entities belonging to a group whose AANA of uncleared derivatives exceeds:
- €1.5 trillion, which began on September 1, 2018 and will run to August 31, 2019; and
- €0.75 trillion, which will run from September 1, 2019 to August 31, 2020.
The Basel Committee and IOSCO confirmed in March this year that its documentation, custodial and operational requirements would not apply unless the bilateral initial margin amount exceeds the €50 million initial margin threshold. However, covered entities are expected to take steps to ensure that they can comply when their exposure reaches the €50 million threshold.
To our knowledge, there have been no statements to date from the EU or U.K. regulators as to whether they will adjust their legislation to align with this new timetable.
View the press release.
View the revised report on margin requirements for uncleared derivatives.
View details of the March 2019 statement.
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