From a banking regulation perspective 2017 will be a busy year; a year that will be shaped by considerable reform. In the first quarter already, an extensive change originating from the European Union (EU), aimed at further stabilising the over the counter (OTC) derivative markets, has come into effect. On 15 December 2016, the EU published the long awaited Delegated Regulation on Regulatory Technical Standards, regarding margin requirements for non-centrally cleared OTC derivatives. With this, the EU has caught up with the implementation timeline of the draft on margin requirements for non-centrally cleared derivatives published in March 2015 by the Basel Committee on Banking Supervision (BCBS) and the International Organisation of Securities Commissions (IOSCO).

The starting point of the international aspiration to stabilise the OTC derivative markets was the 2009 G20 summit in Pittsburgh, where, under the influence of the financial crisis, among other things, a clearing obligation for standardised derivatives, as well as further measures to mitigate risks of non-cleared derivatives, were concluded. In the EU, major elements of the G20 measures have been implemented by the European Market Infrastructure Regulation (EMIR). The clearing obligation for the first interest rate derivatives became applicable in June 2016; the rules for the collateralisation of non-cleared derivatives will follow in 2017.

While the requirement to exchange initial margins will be implemented step by step until 2020, exchange of variation margins are binding for all financial counterparties and non-financial counterparties above the clearing threshold from 1 March 2017. For derivative trades entered into after this due date, new rules for credit support annex (CSA) contracts apply.

Apr-Jun 2017 Issue