Featured Product

    APRA FAQ for Standard on Margins for Non-Centrally Cleared Derivatives

    June 01, 2020

    APRA published a frequently asked question (FAQ) providing guidance to all APRA-regulated entities in determining their requirements under the prudential standard CPS 226 on margins and risk mitigation for non-centrally cleared derivatives. The FAQ addresses the treatment of the Minimum Transfer Amount limit where the base currency is foreign-denominated. CPS 226 requires an APRA covered entity to have appropriate margining practices in relation to non-centrally cleared derivatives. An APRA covered entity must exchange variation margin and post and collect initial margin with a covered counterparty, subject to certain criteria.

    The guidance states that, for both new and existing Credit Support Annexes (CSAs) where the collateral agreement base currency is not in AUD, APRA expects entities to incorporate a prudent buffer for foreign-exchange volatility movements when negotiating the CSA with a given counterparty. However, it may be the case that due to foreign exchange movements, the combined variation margin and initial margin minimum transfer amount exceeds the AUD 750,000 MTA limit despite being below this limit at inception of the CSA agreement. APRA is aware of the operational difficulties to frequently monitor balances as well as the time required to renegotiate CSAs. Notwithstanding this, the expectation is that APRA-covered entities have a regular review process to ensure that, in the situation described above where the AUD-equivalent MTA amount exceeds the prudential limit, amendments are made to the CSA to return under the AUD 750,000 MTA limit with priority to be given to those whose combined variation and initial margin minimum transfer amount are notably greater than the AUD 750,000 limit and have remained so for some time. During the review process, consideration should be given to the following:

    • Expected volatility and direction of foreign-exchange rates;
    • Difference between the MTA and the AUD 750,000 MTA limit and the duration of the excess
    • Nature and level of trading activity undertaken with the counterparty

     

    Related Links

    Keywords: Asia Pacific, Australia, Banking, Securities, CPS 226, Initial Margin, Derivatives, FAQ, Minimum Transfer Amount, APRA

    Related Articles
    News

    EC Issues Regulation on Adjustments to K-Factor Coefficients Under IFR

    The European Commission (EC) published a report summarizing responses to the targeted consultation on the supervisory convergence and the single rulebook in the European Union (EU).

    January 20, 2022 WebPage Regulatory News
    News

    OSFI Issues Results of Pilot on Climate Risk Scenario Analysis

    The Office of the Superintendent of Financial Institutions (OSFI) published an update on the discussion paper that intended to engage federally regulated financial institutions and other interested stakeholders in a dialog with OSFI, to proactively enhance and align assurance expectations over key regulatory returns.

    January 20, 2022 WebPage Regulatory News
    News

    ECB Issues Opinions on Green Bonds Standard and CRR Proposals

    The European Central Bank (ECB) published its opinion on a proposal for a regulation on European green bonds, following a request from the European Parliament.

    January 19, 2022 WebPage Regulatory News
    News

    ESRB Explores Policy Response to Risks Arising from Digitalization

    The Advisory Scientific Committee (ASC) of the European Systemic Risk Board (ESRB) published a report that explores the expected impact of digitalization on provision of financial and banking services, and proposes policy measures to address the risks stemming from digitalization.

    January 18, 2022 WebPage Regulatory News
    News

    EU Authorities Address COVID-19 Reporting, MCD, and PSD2 Issues

    The European Banking Authority (EBA) announced that the guidelines on the reporting and disclosure of exposures subject to measures COVID-relief measures shall continue to apply until further notice.

    January 17, 2022 WebPage Regulatory News
    News

    FI Publishes Multiple Regulatory and Reporting Updates

    The Swedish Financial Supervisory Authority (FI) announced that the capital adequacy reporting as at December 31, 2021 must be done by February 11, 2022.

    January 17, 2022 WebPage Regulatory News
    News

    BSP Tackles Aspects of Lending and Islamic, Open & Sustainable Finance

    The Central Bank of the Philippines (BSP) issued communications covering developments related to online lending platforms, open finance framework and roadmap, and on the expected regulations in the area sustainable finance.

    January 16, 2022 WebPage Regulatory News
    News

    US Agencies Issue Regulatory Updates, FDIC Launches Tech Sprint

    The Board of Governors of the Federal Reserve System (FED) published the final rule that amends Regulation I to reduce the quarterly reporting burden for member banks by automating the application process for adjusting their subscriptions to the Federal Reserve Bank capital stock, except in the context of mergers.

    January 13, 2022 WebPage Regulatory News
    News

    EBA Issues Guide on Bank Resolvability, Consults on Transferability

    The European Banking Authority (EBA) published its assessment of risks through the quarterly Risk Dashboard and the results of the Autumn edition of the Risk Assessment Questionnaire (RAQ).

    January 13, 2022 WebPage Regulatory News
    News

    MFSA Publishes CRD5 Updates and Supervisory Priorities for 2022

    The Malta Financial Services Authority (MFSA) updated the guidelines on supervisory reporting requirements under the reporting framework 3.0.

    January 13, 2022 WebPage Regulatory News
    RESULTS 1 - 10 OF 7875