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 Wednesday 08 April 2020

Uncleared Margin Requirements – One Year Deferral Proposed for Final Phases

On 3 April 2020, the Basel Committee on Banking Supervision (“BCBS”) and the International Organization of Securities Commissions (“IOSCO”) announced a proposed one year extension to the timelines for implementing the final phases of regulatory initial margin requirements for non-centrally cleared OTC derivatives.  They also published an updated framework to reflect the changes.

Updated BCBS/IOSCO compliance schedule:

Covered entities belonging to a group whose aggregate month-end average notional amount (AANA) of uncleared OTC derivatives exceeds:

Initial margin implementation:

Phase 1

EUR 3 trillion

1 September 2016 (*implemented under EMIR on 4 February 2017)

Phase 2

EUR 2.25 trillion

1 September 2017

Phase 3

EUR 1.5 trillion

1 September 2018

Phase 4

EUR 0.75 trillion

1 September 2019

Phase 5

EUR 50 billion

1 September 2021

Phase 6

EUR 8 billion

1 September 2022


Below EUR 8 billion

Not applicable

It is important to note that the relevant regulatory authorities/supervisors will need to make changes to their uncleared margin regulations before the new implementation dates become effective.

The BCBS/IOSCO updates were made in response to the impact of COVID-19 and are designed to allow covered entities to address the immediate impact of this pandemic.

The extension announcement follows shortly after ISDA and 20 other trade associations sent a joint letter to BSBC and IOSCO requesting that the implementation dates were suspended in order for entities to focus on the management of market and credit risk during this volatile period.

In addition they outlined, among other things:

  • Upcoming deadlines (e.g. custodial onboarding) that would impact the ability of parties to be ready for the September 2020 deadline.

  • Concerns with enforceability of electronically executed agreements in certain jurisdictions versus the practical issues of executing hard copies while staff are working from home.

The market appears to have welcomed this announcement during this difficult time.

Posted by Abigail Harding

Tagged: ISDA Credit Support Annex Marginrules UMR

Category: ISDA negotiation

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