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Coronavirus - Deferral of initial margin requirements for derivatives announced – Global

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  • Financial services and markets regulation - Derivatives
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On 3 April 2020, the Basel Committee on Banking Supervision (“BCBS”) and the International Organization of Securities Commissions (“IOSCO”) issued a statement recommending an extension to Phases 5 and 6 of the initial margin requirements for uncleared OTC derivatives.

For more information regarding the initial margin requirements, please see our briefing ‘Buy-side perspective: Preparing for the initial margin big bang’.

New implementation timetable

BCBS and IOSCO have recommended an extension of Phase 5 from 1 September 2020 to 1 September 2021 and Phase 6 from 1 September 2021 to 1 September 2022.

The dates on which in-scope entities are required to perform the calculation of their aggregate month-end average notional amount (“AANA”) of non-centrally cleared derivatives has also been delayed by a year. The relevant dates for ANNA calculations are now March, April and May of 2021 for Phase 5 and March, April and May of 2022 for Phase 6.

The revised implementation timetable is summarised in the following table:



Implementation date

Phase 5

< €750 billion ≥ €50 billion

1 September 2021

Phase 6

> €50 billion > €8 billion

1 September 2022

The statement from BCBS and IOSCO follows an advocacy letter sent by the International Swaps and Derivatives Association, Inc. (“ISDA”) on behalf of 21 industry associations to BCBS and IOSCO requesting the suspension of the timetable for initial margin phase-in. The suspension was requested by ISDA to allow market participants to focus their resources on ensuring continued access to the derivatives market given the challenges created by the COVID-19 pandemic.

BCBS and IOSCO have published a revised version of the margin requirements on their website.

The statement from BCBS and IOSCO will be welcomed by firms which will be in-scope of Phases 5 and 6 many of which will face significant challenges due to the COVID-19 pandemic caused by the displacement of staff and market volatility.

Next steps

It is expected that, as with previous amendments to the initial margin implementation timetable, global legislators will follow the approach from recommended by BCBS and IOSCO. Firms should, however, monitor the reaction from regulators.

Our briefing ‘Buy-side perspective: Relief (for some) as new initial margin deadline published’ in relation to a previous revision to the implementation timetable is also available.

How can Eversheds Sutherland assist?

Our global derivatives team has been advising clients in relation to the initial margin requirements since the requirements were first introduced. As a buy-side focused derivatives practice, we have a deep understanding of the requirements of buy-side entities including insurance companies, pension schemes, commodities firms and investment funds.

We have worked with clients to scope the requirements and to develop standardised initial margin documentation. We can also produce a formal review of the enforceability the collateral arrangements if required under the relevant margin regime.

Members of our global derivatives practice have been active participants in industry working groups in relation to the new regulations including the ISDA Working Group on Margin Requirements (WGMR).