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

    UK Authorities Consult on Implementation of Basel 3.1 Standards

    The UK authorities have published consultations with respect to the Basel requirements for banks. The Prudential Regulation Authority (PRA) published the consultation paper CP16/22 on rules for the implementation of Basel 3.1 standards.

    November 30, 2022 WebPage Regulatory News

    ESAs Issue Multiple Regulatory Updates for Financial Sector Entities

    The three European Supervisory Authorities (ESAs) issued a letter to inform about delay in the Sustainable Finance Disclosure Regulation (SFDR) mandate, along with a Call for Evidence on greenwashing practices.

    November 15, 2022 WebPage Regulatory News

    FSB and NGFS Publish Initial Findings from Climate Scenario Analyses

    The Financial Stability Board (FSB) and the Network for Greening the Financial System (NGFS) published a joint report that outlines the initial findings from climate scenario analyses undertaken by financial authorities to assess climate-related financial risks.

    November 15, 2022 WebPage Regulatory News

    FSB Issues Reports on NBFI and Liquidity in Government Bonds

    The Financial Stability Board (FSB) published a letter intended for the G20 leaders, highlighting the work that it will undertake under the Indian G20 Presidency in 2023 to strengthen resilience of the financial system.

    November 14, 2022 WebPage Regulatory News

    ISSB Makes Announcements at COP27; IASB to Propose IFRS 9 Amendments

    The International Sustainability Standards Board (ISSB) of the IFRS Foundations made several announcements at COP27 and with respect to its work on the sustainability standards.

    November 10, 2022 WebPage Regulatory News

    IOSCO Prioritizes Green Disclosures, Greenwashing, and Carbon Markets

    The International Organization for Securities Commissions (IOSCO), at COP27, outlined the regulatory priorities for sustainability disclosures, mitigation of greenwashing, and promotion of integrity in carbon markets.

    November 09, 2022 WebPage Regulatory News

    EBA Finalizes Methodology for Stress Tests, Issues Other Updates

    The European Banking Authority (EBA) issued a statement in the context of COP27, clarified the operationalization of intermediate EU parent undertakings (IPUs) of third-country groups

    November 09, 2022 WebPage Regulatory News

    EU Finalizes Rules Under Crowdfunding Service Providers Regulation

    The European Union has finalized and published, in the Official Journal of the European Union, a set of 13 Delegated and Implementing Regulations applicable to the European crowdfunding service providers.

    November 08, 2022 WebPage Regulatory News

    OSFI Sets Out Work Priorities and Reporting Updates for Banks

    The Office of the Superintendent of Financial Institutions (OSFI) published an annual report on its activities, a report on forward-looking work.

    November 07, 2022 WebPage Regulatory News

    APRA Finalizes Changes to Capital Framework, Issues Other Updates

    The Australian Prudential Regulation Authority (APRA) finalized amendments to the capital framework, announced a review of the prudential framework for groups.

    November 03, 2022 WebPage Regulatory News
    RESULTS 1 - 10 OF 8597