Friday October 29 2021

News Source: Fund Regulation

Focus: Liquidity Risk Management

Type: General

Country: International




On 26th October 2021, the Basel Committee on Banking Supervision (BCBS), the Committee on Payments and Market Infrastructures (CPMI) and the International Organization of Securities Commissions (IOSCO) invited comments on their joint consultation report review of margining practices.

The report – which is part of the Financial Stability Board’s work programme to enhance the resilience of the non-bank financial intermediation sector – looks at margin calls in March and April 2020, margin practice transparency, predictability and volatility across various jurisdictions and markets, as well as market participants’ liquidity management preparedness.

Based on surveys of central counterparties (CCPs), clearing members and broker-dealers, clients (ie entities that participate in these markets through an intermediary) and regulatory authorities, and other data analysis, the report finds that:

  • Variation margin calls in both centrally and non-centrally cleared markets in March were large, and significantly higher than in February 2020. The peak CCP variation margin call was $140 billion on 9 March 2020.
  • Initial margin requirements for centrally cleared markets increased by roughly $300 billion over March 2020, and varied substantially across, and within, asset classes.
  • Initial margin requirements on non-centrally cleared derivatives remained relatively stable during the stress period.

On the back of that analysis, the consultative report identifies six potential areas for further policy work:

  • Increasing transparency in centrally cleared markets.
  • Enhancing liquidity preparedness of market participants as well as liquidity disclosures.
  • Identifying data gaps in regulatory reporting.
  • Streamlining variation margin processes in centrally and non-centrally cleared markets.
  • Evaluating the responsiveness of centrally cleared initial margin models to market stresses, with a focus on impacts and implications for CCP resources and the wider financial system
  • Evaluating the responsiveness of non-centrally cleared initial margin models to market stresses.

The standard setters have invited feedback on the consultative report by 12 January 2022.

Click on the above link for further information.