Upcoming global margin requirements, for non-centrally cleared derivatives, have been postponed to September 2021.
It is the final implementation of the new framework that is now being given another full year’s notice for preparations. The decision has been taken jointly by the Basel Committee on Banking Supervision (BCBS) and the board of the International Organization of Securities Commissions (IOSCO).
A 26-page status summary can be downloaded here. Global Custodian is among the media reporting on expected consequences for the industry.
Part of post-crisis package
The increased margin requirements for non-centrally cleared derviatives contracts are one piece of the regulation package meant to decrease the opaque systematic risks related to OTC derivatives. These proved a problem, to put it mildly, in the 2007–2008 financial crisis, and an initiative for change was taken by the G20 organization.
As regulators across the world try to encourage instrument standardization and central clearing, they see higher requirements on non-centrally cleared derivatives as necessary to maintain the right incentives for central clearing.