- The Basel Committee on Banking Supervision (BCBS), the BIS Committee on Payments and Market Infrastructures (CPMI) and the International Organization of Securities Commissions (IOSCO) today published Final Reports on initial and variation margin in centrally cleared and non-centrally cleared markets.
- The Reports address areas of further policy work identified in the 2022 BCBS-CPMI-IOSCO Review of margining practices as part of the policy responses coordinated by the Financial Stability Board (FSB) to the March 2020 “dash for cash” market turmoil.
- The Reports contain proposals and practices intended to improve transparency, streamline margin processes and increase the predictability of margin requirements across centrally and non-centrally cleared markets.
The BCBS, the CPMI and IOSCO today published three Reports containing proposals and practices to improve transparency and streamline margin processes and increase the predictability of margin requirements across centrally and non-centrally cleared markets.
The Reports are part of a holistic work program bringing together the BCBS, the CPMI, IOSCO and the FSB. They were developed following the 2022 publication of the BCBS-CPMI-IOSCO report Review of margining practices, which identified areas for further work.
Transparency and responsiveness of initial margin in centrally cleared markets – review and policy proposals, from the BCBS, CPMI and IOSCO, sets out 10 final policy proposals relevant to central counterparties and clearing members.
The proposals seek to aid market participants’ and regulators’ understanding of initial margin requirements and responsiveness through increased transparency. An accompanying cover note summarises consultation feedback. The relevant standard setting bodies will consider how best to implement the proposals.
In tandem, the CPMI and IOSCO have published the Final Report Streamlining Variation Margin in Centrally Cleared Markets – Examples of Effective Practices. The eight effective practices set out in the Report provide examples of how standards set out in the CPMI-IOSCO Principles for financial market infrastructures, as supplemented by the relevant guidance, can be met.
The practices aim to enhance market participants’ liquidity preparedness for above-average variation margin calls through increased transparency and the efficient collection and distribution of variation margin in centrally cleared markets.
In addition, the BCBS and IOSCO have published the Final Report Streamlining Variation Margin Processes and Initial Margin Responsiveness of Margin Models in Non-centrally Cleared Markets. The Report sets out eight recommendations to firms to encourage the widespread implementation of good market practices. These practices streamline variation margin processes and increase the responsiveness of initial margin models.
The FSB’s Final Report on Liquidity Preparedness for Margin and Collateral Calls, published in December 2024, forms part of this work program and complements the BCBS, CPMI and IOSCO reports.
These Reports should be read together as elements of a comprehensive approach to improving transparency, streamlining margin processes, increasing the predictability of margin requirements and improving the liquidity preparedness of non-bank market participants for margin calls.
