Industry regulators issue consultation paper on CCP margining practices
17 January 2024 EU
Image: AdobeStock/doganmesut
Three senior regulatory bodies for EU banking, payments and market infrastructure have issued a joint consultative report designed to strengthen understanding of initial margin calculations and future margin requirements for centrally cleared transactions.
This document, entitled Transparency and Responsiveness of Initial Margin in Centrally Cleared Markets: Review and Policy Proposals, builds on its earlier publication BCBS-CPMI-IOSCO Review of Margining Practices released in September 2022.
The consultation document from the Basel Committee on Banking Supervision (BCBS), the Committee on Payments and Markets Instructure (CPMI) of the Bank for International Settlements and the International Organisation of Securities Commissions (IOSCO) puts forward 10 policy proposals designed to improve the resilience of central clearing infrastructure.
As part of this programme, the report proposes that CCP should share more information relating to their margining models, including the anti-procyclicality provisions that they have in place, and they should be required to disclose quantitative risk measures on a more frequent and timely basis.
This should form part of broader steps by CCPs to improve their governance frameworks. When a clearing house uses its discretion to override margin model requirements, the consultation document indicates that this should be within a publicly-disclosed analytical and governance framework.
CCPs should also reinforce the suite of margin simulation tools that they offer to clearing members and the clients to whom they offer sponsored access.
For clearing members, the report advises that these firms should offer greater transparency to their clients and to CCPs where they offer clearing services. They should also improve the analytical frameworks that they have in place for evaluating responsiveness when passing margin calls on to clients.
BCBS, CPMI and IOSCO have circulated the report for public consultation and have requested industry feedback by 16 April 2024.
The organisations indicate that two further reports — one named Streamlining Variation Margin Processes and Initial Margin Responsiveness of Margin Models in non-Centrally Cleared Markets and the other called Streamlining Variation Margin in Centrally Cleared Markets: Examples of Effective Practices — will be published shortly.
This document, entitled Transparency and Responsiveness of Initial Margin in Centrally Cleared Markets: Review and Policy Proposals, builds on its earlier publication BCBS-CPMI-IOSCO Review of Margining Practices released in September 2022.
The consultation document from the Basel Committee on Banking Supervision (BCBS), the Committee on Payments and Markets Instructure (CPMI) of the Bank for International Settlements and the International Organisation of Securities Commissions (IOSCO) puts forward 10 policy proposals designed to improve the resilience of central clearing infrastructure.
As part of this programme, the report proposes that CCP should share more information relating to their margining models, including the anti-procyclicality provisions that they have in place, and they should be required to disclose quantitative risk measures on a more frequent and timely basis.
This should form part of broader steps by CCPs to improve their governance frameworks. When a clearing house uses its discretion to override margin model requirements, the consultation document indicates that this should be within a publicly-disclosed analytical and governance framework.
CCPs should also reinforce the suite of margin simulation tools that they offer to clearing members and the clients to whom they offer sponsored access.
For clearing members, the report advises that these firms should offer greater transparency to their clients and to CCPs where they offer clearing services. They should also improve the analytical frameworks that they have in place for evaluating responsiveness when passing margin calls on to clients.
BCBS, CPMI and IOSCO have circulated the report for public consultation and have requested industry feedback by 16 April 2024.
The organisations indicate that two further reports — one named Streamlining Variation Margin Processes and Initial Margin Responsiveness of Margin Models in non-Centrally Cleared Markets and the other called Streamlining Variation Margin in Centrally Cleared Markets: Examples of Effective Practices — will be published shortly.
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