The Financial Stability Board (FSB) has published a consultation report on liquidity preparedness for margin and collateral calls. Forming a part of the FSB’s work on enhancing the resilience of non-bank financial intermediation (NBFI), the report is a follow-up on the findings of a 2022 review of margining practices. In it, in addition to consultation questions, the board proposes eight policy recommendations for mitigating the impact of spikes in margin and collateral calls in the NBFI sector.

The recommendations target the centrally and non-centrally cleared derivatives and securities markets, including securities financing such as repo. The latest report – and the 2022 review it follows up on – were motivated by liquidity strains in the NBFI sector during times of market stress, such as the March 2020 turmoil, the collapse of asset management firm Archegos, and the stress in liability-driven investment funds in 2022.

A necessary evil?

Based on its analysis of such stress events, FSB’s findings suggest that although “margin and collateral calls are a necessary protection against counterparty risk, they can also amplify the demand for liquidity by market participants if they are unexpected in times of stress and affect a large enough part of the market”. The report adds that a sudden increase in liquidity demand “can contribute to the transmission of stress to other parts of the financial system and the real economy”. Weaknesses in liquidity risk management and governance are the key causes of inadequate liquidity preparedness for margin and collateral calls.


Certain activities and type of entities, which FSB calls “key amplifiers”, are “more likely to contribute to aggregate liquidity imbalances”. The size, structural characteristics, and stress behaviour of these entities may amplify shocks.

Apply as appropriate

Building on rules and regulations for liquidity risk management that “already exist in many sectors and jurisdictions”, the eight policy recommendations in the paper cover liquidity risk management and governance; stress testing and scenario design; and collateral management practices of non-bank market participants. FSB advises that the recommendations should be applied “proportionately to the underlying risks of different non-bank market participants”.