Cross-Border Derivatives Transactions Subject to Margin Requirements

February 8, 2017BSP MEMORANDUM NO. M-2017-004TO : All Banks and Quasi-Banks   SUBJECT : Cross-Border Derivatives Transactions Subject to Margin Requirements In March 2015, the Basel Committee on Banking Supervision (BCBS) and the International Organization of Securities Commissions (IOSCO) finalized the policy framework on margin requirements for non-centrally cleared derivatives. 1 The margin requirements are intended to prevent contagion and spillover effects as margins can be used to offset losses arising from a counterparty default.The framework requires all covered entities 2 that engage in non-centrally cleared derivatives to exchange initial and variation margins. The methodologies for calculating margins should reflect the current and future exposures associated with the portfolio of non-centrally cleared derivatives. Assets collected as collateral for margin purposes should be highly liquid and should, after the application of an appropriate haircut, be able to hold their value in a time of stress.Variation margin requirements are being phased in from 1 September 2016 to 1 March 2017 while initial margin requirements are being phased in from 1 September 2016 to 1 September 2020. 3 Jurisdictions...