FSB cautions over further margin rules delays

Only the US, Canada and Japan are ready to implement initial margin requirements on 1 September.

The Financial Stability Board (FSB) has fired a warning shot to countries behind schedule on adopting incoming margin requirements for non-cleared OTC derivatives.

The FSB, chaired by Bank of England governor Mark Carney and whose members include the US Federal Reserve and Hong Kong Monetary Authority (HKMA), stated that global adoption of new collateral rules for derivatives should be adopted as soon as possible, urging those behind to “urgently take steps”.

Only the US, Canada and Japan are ready to implement the initial margin requirements on 1 September. A second deadline of March 2017 is currently set for regulators to phase in variation margin requirements.

According to the FSB’s review of 24 countries oversight of OTC derivatives, it warned that 10 jurisdictions do not expect to implement variation margin requirements in the first half of 2017, and eight jurisdictions may not be able to adopt the rules by 2017 at all.

“Such differences in the coverage of regulatory requirements could prove challenging for market participants, particularly where firms or transactions are subject to multiple jurisdictions’ regulatory requirements,” the FSB stated in the review.

“Jurisdictions that are not on track to implement the BCBS and IOSCO margin requirements in accordance with the phase-in schedule should urgently take steps to meet the internationally agreed schedule.”

Australia, Singapore and Hong Kong became the latest countries to delay implementing the collateral rules, and did not state when it intends to adopt the rules. In June the European Commission said it would delay initial margin requirements until the end of the year.

Market participants fear that a fragmented timetable across jurisdictions will increase complexity and could disrupt cross-border trading activity. With further ambiguity over when these rules will be adopted in certain countries, firms may be faced with a last minute scramble to implement systems and comply.