The Financial Services Commission of Korea (FSC) announced its adjusted schedule to implement the initial margin requirements for non-centrally cleared derivative transactions. The initial margin requirements for financial institutions with derivatives of KRW 70 trillion or more will be implemented from September 01, 2020 as scheduled, while the implementation for the requirements with derivatives of less than KRW 70 trillion will be delayed until September 01, 2021. FSC will also propose a bill on margin requirements for non-centrally cleared OTC derivative transactions as the relevant guidelines by FSS are due to expire in August 2020. The bill is expected to prescribe legal obligation of margin requirements and disciplinary measures against non-compliance with the aim to ensure the effectiveness of margin requirement rules.
One-year postponement of the implementation of initial margin requirements for smaller financial institutions until September 01, 2021 is expected to cover 19 financial companies (as of 2018). About 35 financial companies are expected to be subject to initial margin requirements from September 01, 2020. FSS will hold a briefing on implementation plans for initial margin requirements to help financial institutions to be better prepared for the new rules.
In the detailed framework announced in March 2015, BCBS and IOSCO set differential implementation schedules according to the amount of non-centrally cleared OTC derivatives to give institutions enough time to prepare for the new regime of margin requirements. On July 23, 2019, BCBS and IOSCO announced a postponement of the implementation of initial margin requirements for financial institutions with non-centrally cleared derivatives of less than EUR 50 billion. Korea had adopted the margin requirements for non-centrally cleared OTC derivatives in March 2017 in the form of administrative guidance executed by FSS. Since March 2017, the variation margin requirements are being applied to 76 financial institutions as of July 2019. The initial margin requirements were initially due to apply in September 2020, given the smaller amount of non-centrally derivative transactions of domestic financial institutions.
Related Link: Press Release (PDF)
Keywords: Asia Pacific, Korea, Banking, Securities, OTC Derivatives, Margin Requirements, Implementation Timeline, Initial Margin, IOSCO, BCBS, FSC
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