March 05, 2019

BCBS and IOSCO issued a statement to support timely and smooth implementation of the framework for margin requirements for non-centrally cleared derivatives. The statement highlights that significant progress has been made to implement this framework and provides guidance to support implementation and clarify requirements of the framework. BCBS and IOSCO will continue to monitor the effect of meeting the final stage of phase-in, which is scheduled for 2020.

BCBS and IOSCO realize that market participants may need to amend derivatives contracts in response to interest rate benchmark reforms. Amendments to legacy derivative contracts pursued solely for the purpose of addressing interest rate benchmark reforms do not require the application of the margin requirements for the purposes of the BCBS and IOSCO framework. However, the position may be different under relevant implementing laws. 

In the remaining phases of the framework's implementation in 2019 and 2020, initial margin requirements will apply to a large number of entities for the first time, potentially involving documentation, custodial, and operational arrangements. BCBS and IOSCO note that the framework does not specify documentation, custodial, or operational requirements if the bilateral initial margin amount does not exceed the framework's EUR 50 million initial margin threshold. It is expected, however, that covered entities will act diligently when their exposures approach the threshold to ensure that the relevant arrangements needed are in place if the threshold is exceeded.


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Keywords: International, Banking, Securities, Derivatives, Margin Requirements, Interest Rate Benchmarks, IOSCO, BCBS

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