LONDON, April 25 (IFR) - Seven member-jurisdictions of the
Basel Committee on Banking Supervision are yet to issue final or
draft rules on margin requirements for uncleared derivatives,
despite the passing of the first implementation deadline last
According to the committee's latest progress report on
adoption of the Basel regulatory framework, Argentina, Brazil,
China, Indonesia, Mexico, Russia and Turkey are yet to finalise
uncleared margin rules, which were scheduled for international
implementation from September 2016 for the largest dealers.
All other derivatives participants were due to begin
exchanging daily margin starting March 2017 against over-the
counter derivatives that are not cleared through central
Brazil is expected to publish rules in June, though
implementation could be revised, pending the results of a public
consultation. Mexican regulators aim to have rules before
Mexican covered entities are brought into scope for initial
margin requirements. Based on average notional amounts
outstanding, those entities would be required to post IM from
2020, according to the globally agreed implementation timeline.
Two further jurisdictions - India and South Africa - have
published draft legislation for the new requirements, though
they are yet to implement the new rules. The Reserve Bank of
India published a discussion paper in March 2016, but
implementation has been deferred for the time being.
Uncleared margin rules form a key strand of post-crisis
reforms that aim to reduce counterparty risk in the US$544trn
over-the-counter swaps market by encouraging more activity into
central counterparty clearinghouses.
Many jurisdictions struggled meet the globally agreed
deadlines. Regulators in Hong Kong, Singapore and Australia
joined the European Union in delaying implementation for key
dealers last September, instead going live with the rules early
this year, just ahead of "big bang" implementation that cast VM
rules across all participants.
The US stuck to the deadline, albeit with the support of
exemptive relief that provided an additional six months for full
Rules requiring all participants to begin exchanging
variation margin became effective in March 2017, though
regulators around the world have bowed to industry pressure,
providing a six-month grace period for full compliance.
The 12th progress report on the Basel III framework shows
that all 27 member jurisdictions have final risk-based capital
rules, liquidity coverage ratios and capital conservation
buffers in force. Most also have issued final rules for
countercyclical capital buffers and have published final or
draft rules for domestic systemically important banks. All five
jurisdictions that are home to global systemically important
banks have a G-SIB framework in place.
"Members are now turning to the implementation of other
Basel III standards, including those on TLAC holdings, the
market risk framework, the leverage ratio and the net stable
funding ratio," said the progress report.
Significant challenges remain, however, particularly
surrounding capital requirements for CCP exposures, where only
17 of the 27 member jurisdictions have published draft or final
rules, while 19 have issued rules for standardised counterparty
credit risk calculation methods.
(Reporting by Helen Bartholomew)