10 June 2015

ESAs consult on margin requirements for non-ce‎ntrally cleared derivatives

Therefore, the consultation focuses only on a narrow set of topics as most of the decisions have already been agreed following the first consultation held in April 2014. The consultation runs until 10 July 2015.

For those over-the-counter (OTC) derivative transactions that will not be subject to central clearing, these draft RTS prescribe the regulatory amount of initial and variation margin that counterparties should exchange as well as the methodologies for their calculations. In addition, these draft RTS outline the criteria for the eligible collateral and establish the criteria to ensure that such collateral is sufficiently diversified and not subject to wrong-way risk.

With respect to the first consultation paper, the ESAs reviewed or clarified several aspects of the proposed rules. These include:

·         the exchange of margins with third countries entities and the treatment of non-financial counterparties;

·         the treatment of covered bonds swaps; the timing of margin exchanges;

·         concentration limits for sovereign debt securities;

·         the requirements on trading documentation;

·         minimum credit quality of collateral;

·         initial margin models;

·         haircuts for foreign exchange (FX) mismatch;

·         the treatment of cash collateral for initial margin; and

·         reviewed criteria on intragroup exemptions.

Furthermore, following the amendments of the standards issued by the Basel Committee on Banking Supervision and the IOSCO in March 2015, these RTS include a revised phase-in for initial margin requirements and a new phase-in for variation margin.

All the responses to the first consultation paper were considered when developing this new version of the standards. A comprehensive feedback statement including industry stakeholders’ comments to the first and the second consultation paper will accompany the final draft RTS.

Comments to this consultation can be sent by 10 July 2015.

Full press release

Consultation page

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