BCBS, CPMI, and IOSCO (the Committees) are inviting entities that participate in market infrastructures and securities markets through an intermediary as well as non-bank intermediaries to complete voluntary surveys on the use of margin calls. The surveys are part of an examination into liquidity shortfalls during the early stages of the COVID-19 pandemic. The Committees are also collecting data from central counterparties (CCPs) and bank intermediaries. The results of the surveys will feed into work program to improve the resilience of non-bank financial intermediaries. Responses on the survey are requested by May 17, 2021.
As part of the work program to enhance the resilience of the non–bank financial intermediation (NBFI) sector, G20 agreed that FSB should coordinate with the Committees to look at issues around margin calls during the early stages of the COVID-19 pandemic. G20 has called for a review of margining practices in cleared and uncleared markets, including with regard to the preparedness of market participants for margin calls. To achieve this objective, the Committees have set up a Joint Working Group on Margin, which is co-chaired by BoE and the U.S. CFTC. The Joint Working Group is examining the following areas, taking into account both initial and variation margins:
- Margin in cleared and uncleared markets during the March market turmoil, including clearing member-client dynamics (workstream 1)
- Margin practice transparency, predictability, and volatility during the March market turmoil across various markets, jurisdictions, and margining models (workstream 2)
- Liquidity management preparedness of market participants (especially non-banks) to meet margin calls and the actions taken to prepare (for example, ability of firms to use or transform high quality liquid assets) (workstream 3)
To undertake such a data-driven analysis, workstream 2 of the Joint Working Group is undertaking an ad-hoc survey to better understand the impact of margin calls in uncleared markets and margin calls related to house and client clearing activities from the perspective of firms. Additionally, workstream 3 of the Joint Working Group is undertaking an ad-hoc survey to better understand whether various financial market participants were prepared to meet increased margin calls and the mechanisms through which they funded these calls. The data required is outlined in the data templates. Respondents are asked to participate on a best effort basis and, as appropriate, to include any additional information or accompanying documents that describe aspects of their firm’s liquidity strategy, liquidity risk management practices, and constraints faced during the time-period under investigation. Individual responses will remain confidential and will be used only in anonymized and/or aggregated format in future publications. Respondents may respond to all or part of the questions. The Committees will be holding an information session on May 06, 2021 to provide additional context to the surveys and respond to questions of market participants.
Keywords: International, Banking, Securities, COVID-19, NBFI, G20, Systemic Risk, Survey, Initial Margin, Variation Margin, FSB, BCBS, CPMI, IOSCO
Leading economist; commercial real estate; performance forecasting, econometric infrastructure; data modeling; credit risk modeling; portfolio assessment; custom commercial real estate analysis; thought leader.
Across 35 years in banking, Blake has gained deep insights into the inner working of this sector. Over the last two decades, Blake has been an Operating Committee member, leading teams and executing strategies in Credit and Enterprise Risk as well as Line of Business. His focus over this time has been primarily Commercial/Corporate with particular emphasis on CRE. Blake has spent most of his career with large and mid-size banks. Blake joined Moody’s Analytics in 2021 after leading the transformation of the credit approval and reporting process at a $25 billion bank.
Previous ArticleOSFI Outlines Prudential Policy Priorities for Coming Months
The Board of Governors of the Federal Reserve System (FED) adopted the final rule on Adjustable Interest Rate (LIBOR) Act.
The European Central Bank (ECB) published an updated list of supervised entities, a report on the supervision of less significant institutions (LSIs), a statement on macro-prudential policy.
The Hong Kong Monetary Authority (HKMA) published a circular on the prudential treatment of crypto-asset exposures, an update on the status of transition to new interest rate benchmarks.
The European Commission (EC) adopted the standards addressing supervisory reporting of risk concentrations and intra-group transactions, benchmarking of internal approaches, and authorization of credit institutions.
The China Banking and Insurance Regulatory Commission (CBIRC) issued rules to manage the risk of off-balance sheet business of commercial banks and rules on corporate governance of financial institutions.
The Hong Kong Monetary Authority (HKMA) made announcements to address sustainability issues in the financial sector.
The European Banking Authority (EBA) published regulatory standards on identification of a group of connected clients (GCC) as well as updated the lists of identified financial conglomerates.
The General Board of the European Systemic Risk Board (ESRB), at its December meeting, issued an updated risk assessment via the quarterly risk dashboard and held discussions on key policy priorities to address the systemic risks in the European Union.
The Financial Conduct Authority (FCA) is seeking comments, until December 21, 2022, on the draft guidance for firms to support existing mortgage borrowers.
The Financial Stability Board (FSB) published a report that assesses progress on the transition from the Interbank Offered Rates, or IBORs, to overnight risk-free rates as well as a report that assesses global trends in the non-bank financial intermediation (NBFI) sector.