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Basel/IOSCO for Non-cleared Derivatives

18/08/2014

When new recommendations on non-cleared derivatives were finalized by BCBS/IOSCO in september 2013, it was the next step in years of efforts on how to protect the financial system from the derivatices-borne systemic risk coming from bilaterally traded. As these recommendations become rules in various jurisdictions, financial market participants must evaluate how to best implement them.

 

This report focuses on strategies and preparations for risk-based margining and collateral management in the non-cleared derivatives arena. Initial margin (IM) in particular will change meaningfully as regulators shift to a "defaulter pays" model. The credit exposure that was embedded in bilateral derivatives, and especially those historically without IM requirements, will require a new operationalization of more risk-sensitive collateral management. Variation Margin (VM) siloing by asset class and its inherent complications should also be considered. Banks and investors need to understand what the changes are, if and when those changes impact them, and what choices they need to make as a result.

 

Complete the form for a complimentary access to the Finadium " Preparing for Risk-based Margining of Non-cleared Derivatives