February 8, 2017
BSP MEMORANDUM NO. M-2017-004
TO | : | 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....