Investment Operations

Basel Committee, IOSCO Agree to One-Year Extension to OTC Margin Requirements


The Basel Committee on Banking Supervision and the International Organization of Securities Commissions (IOSCO) have acknowledged the progress that has been made to implement the framework for margin requirements for non-centrally cleared derivatives, but also says it understands that, in the final phase of implementation, initial margin requirements are scheduled to apply to a large number of entities for the first time.

In March of this year, the Basel Committee and IOSCO published a statement noting that the framework does not specify documentation, custodial or operational requirements if a covered entity’s bilateral initial margin amount does not exceed the framework’s €50 million initial margin threshold.

Further, the Basel Committee and IOSCO said in a joint statement they have agreed to extend by one year the final implementation of the margin requirements. With this extension, the final implementation phase will take place on 1 September 2021, at which point covered entities with an aggregate average notional amount (AANA) of noncentrally cleared derivatives greater than €8 billion will be subject to the requirements.

To facilitate this extension, the Basel Committee and IOSCO also will introduce an additional implementation phase whereby as of 1 September 2020 covered entities with an AANA of non-centrally cleared derivatives greater than €50 billion will be subject to the requirements.

The Basel Committee and IOSCO said they “have agreed to this extended timeline in the interest of supporting the smooth and orderly implementation of the margin
requirements, which is consistent and harmonized across their member jurisdictions and helps avoid market fragmentation that could otherwise ensue.”

The two groups said they expect that covered entities will act diligently to comply with the requirements by this revised timeline and strongly encourage market participants to make all relevant arrangements on a timely basis. They have published on their websites a revised version of the margin requirements to reflect this limited revision to extend the implementation timeline by one year. The revised publication, they said, features no other substantive changes to the margin requirements framework, and, consistent with their mandate, they will continue to monitor progress in implementation to ensure consistent implementation across products, jurisdictions and market participants.