Non Cleared Initial Margin

The Basel Committee on Banking Supervision (BCBS) and the International Organization of Securities Commissions (IOSCO) have published a set of minimum standards for margin requirements for non-centrally cleared derivatives. These standards will be further adopted and developed into regulatory rules by relevant regulatory jurisdictions, such as the European Securities and Markets Authority (ESMA) for Europe, and the Commodity Futures Trading Commission (CFTC) for the US. 

How InteDelta can help

The challenges faced by institutions in implementing non-cleared margin calculation and processing capabilities are proving to be significant. InteDelta supports institutions to successfully implement the necessary changes in the most effective way. Our services include:

  • Impact assessment
  • Design of required changes to organisation, governance and business processes
  • Initial Margin modelling and methodology development
  • Initial Margin systems design: assessment of technology options, system selection, business and functional requirements, implementation support

The following are the key topics covered by the policy framework

  • Product and entity scope – covers the rules to determine in-scope products and counterparties that would become eligible to meet the new rules
  • Minimum amounts and calculation  for Initial Margin (IM) and Variation Margin (VM)
  • Collateral eligibility and haircuts
  • Treatment of collateral provided for margin (IM and VM)

o    Re-hypothecation

o    Segregation

o    Transactions with affiliates

Key business impact areas for the margin requirements

  • Funding and liquidity
  • Legal and operational processes, including likely increase in disputes investigation and resolution process
  • Technology and infrastructure to support new regulatory and operational processes

Benefits of Initial Margin requirements

  • Reduced counterparty credit risk as the initial margin offers enhanced protection
  • Reduction of Risk Weighted Assets (RWA) in capital calculation

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