International bodies report on streamlining variation margin processes and initial margin responsiveness of margin models in non-centrally cleared markets

The Basel Committee on Banking Standards and International Organization of Securities Commissions published a final report on streamlining variation margin processes and initial margin responsiveness of margin models in non-centrally cleared markets. The report follows on from the BCBS-CPMI-IOSCO September 2022 review of margining practices. To encourage the widespread implementation of good market practices related to variation margin processes and the responsiveness of initial margin models, the report sets out eight recommendations to participants in non-centrally cleared markets. The first four recommendations aim to address challenges that could inhibit a seamless exchange of variation margin during a period of stress. The other four highlight practices that would support market participants' smooth implementation of initiatives to ensure the calculation of initial margin is consistently adequate for market conditions and proposes that supervisors monitor whether these developments are sufficient to make initial margin responsive enough to extreme market shocks. The report forms one element 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, jointly taken by the BCBS, Committee on Payments and Market Infrastructures, IOSCO, and the Financial Stability Board. It is intended to be read alongside the other related reports published on the same day, discussed in our separate blogs, Committee on Payments and Market Infrastructures and International Organization of Securities Commissions report on effective practices for streamlining variation margin in centrally cleared markets and Basel Committee on Banking Standards, Committee on Payments and Market Infrastructures and International Organization of Securities Commissions final report on transparency and responsiveness of initial margin in centrally cleared markets.
 
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