SELL SIDE

UBS warns non-cleared margin rules will stunt activity

UBS’s annual report revealed the bank is unprepared for non-cleared margin rules.

By Hayley McDowell hayley.mcdowell@straetgic-i.com March 10, 2017 12:15 PM GMT

UBS has said the non-cleared margin rules and the delays to implementation across several jurisdictions will have severe affects on its OTC derivatives trading activities.

In the Swiss bank’s annual report, UBS explained the non-cleared margin requirements will have “a significant operational and funding impact on the OTC derivatives activities of UBS and many of our clients.”

It added the recent delays to the rules have also compromised its ability to complete execution of required documentation and operational processes with counterparties.

UBS said this “may limit our and other dealers’ ability to transact with clients until this is remedied.”

Earlier this year, a group of industry associations called on regulators to enforce a six-month grace period ahead of the implementation of non-cleared margin rules.

They highlighted a number of documentation and operational challenges, which would see trading relationships severely disrupted.

US authorities agreed to delay enforcement by six-months, although the European Securities and Market Authority (ESMA) refused to do the same.

“It is unfortunate that the financial industry has not managed to prepare for the implementation.

“Any further delays of the application of the EU rules would formally need to be implemented through EU legislation, which is not possible at this point in time due to the lengthy process for adopting EU legislation,” the European regulator said.