MAS Revises Guide on Margin Requirements for OTC Derivatives Contracts
MAS revised the guidelines on margin requirements for non-centrally cleared over-the-counter (OTC) derivatives contracts. The document provides guidance on the scope of products and entities, margin calculations and methodologies, and eligible collateral and haircuts. MAS issued these guidelines pursuant to section 321 of the Securities and Futures Act (Cap. 289). These guidelines apply to the MAS Covered Entities. MAS has amended the list of uncleared derivatives contracts for which the exchange of margins does not apply. MAS made changes to Annex 1 of the guidelines, which provides a list of the MAS Covered Entities that need not undertake exchange of margins.
As per the guideline, the amount of initial margin to be exchanged should be calculated by reference to either a quantitative portfolio margin model or a standardized margin schedule outlined in Annex 2. An MAS Covered Entity may opt for either approach and not restrict itself to one approach for all its uncleared derivatives contracts. However, the MAS Covered Entity should be consistent in its approach for all contracts within the same well-defined asset class. Reasons for the approach should be based on fundamental considerations, such as differing models approved in foreign jurisdictions or the inability of certain counterparties to use certain models or approaches.
An MAS Covered Entity should commence the exchange of initial margin in respect of uncleared derivatives contracts entered into with a counterparty—that is, an MAS Covered Entity or a Foreign Covered Entity from the phase-in dates specified in the guidelines. The exchange of initial margin applies from each phase-in date where both the MAS Covered Entity and the counterparty each belong to a consolidation group whose aggregate notional amount of uncleared derivatives contracts exceeds the respective thresholds. The MAS Covered Entity means a person who is exempt from holding a capital markets services license under section 99(1)(a) or (b)3 of the Securities and Futures Act.
Keywords: Asia Pacific, Singapore, Banking, Securities, OTC Derivatives, Margin Requirements, Guidelines, Initial Margin, MAS
Previous Article
EC to Finalize Digital Finance Strategy Later This YearRelated Articles
OSFI Issues Phase2 Consultation on Climate Scenario Exercise for Banks
The Office of the Superintendent of Financial Institutions (OSFI) recently announced a consultation on the second phase of the Standardized Climate Scenario Exercise (SCSE) for banks and other financial institutions it regulates in Canada.
BIS and Central Banks Experiment with GenAI to Assess Climate Risks
A recent report from the Bank for International Settlements (BIS) Innovation Hub details Project Gaia, a collaboration between the BIS Innovation Hub Eurosystem Center and certain central banks in Europe
Nearly 25% G-SIBs Commit to Adopting TNFD Nature-Related Disclosures
Nature-related risks are increasing in severity and frequency, affecting businesses, capital providers, financial systems, and economies.
Singapore to Mandate Climate Disclosures from FY2025
Singapore recently took a significant step toward turning climate ambition into action, with the introduction of mandatory climate-related disclosures for listed and large non-listed companies
SEC Finalizes Climate-Related Disclosures Rule
The U.S. Securities and Exchange Commission (SEC) has finalized the long-awaited rule that mandates climate-related disclosures for domestic and foreign publicly listed companies in the U.S.
EBA Proposes Standards Related to Standardized Credit Risk Approach
The European Banking Authority (EBA) has been taking significant steps toward implementing the Basel III framework and strengthening the regulatory framework for credit institutions in the EU
US Regulators Release Stress Test Scenarios for Banks
The U.S. regulators recently released baseline and severely adverse scenarios, along with other details, for stress testing the banks in 2024. The relevant U.S. banking regulators are the Federal Reserve Bank (FED), the Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC).
Asian Governments Aim for Interoperability in AI Governance Frameworks
The regulatory landscape for artificial intelligence (AI), including the generative kind, is evolving rapidly, with governments and regulators aiming to address the challenges and opportunities presented by this transformative technology.
EBA Proposes Operational Risk Standards Under Final Basel III Package
The European Union (EU) has been working on the final elements of Basel III standards, with endorsement of the Banking Package and the publication of the European Banking Authority (EBA) roadmap on Basel III implementation in December 2023.
EFRAG Proposes XBRL Taxonomy and Standard for Listed SMEs Under ESRS
The European Financial Reporting Advisory Group (EFRAG), which plays a crucial role in shaping corporate reporting standards in European Union (EU), is seeking comments, until May 21, 2024, on the Exposure Draft ESRS for listed SMEs.