Initial margin – Special report 2021

Global uncleared margin rules require over-the-counter derivatives counterparties to post initial margin (IM) against their bilateral trades when outstanding notional exceeds a certain threshold.

While the timetable for phases five and six was extended because of the discruption caused by the Covid-19 pandemic, many of the 250 firms caught in phase five are no further forward in their preparations. Fewer than half have submitted the necessary documentation to open custody accounts, for example, prompting fears of a logjam as the September deadline approaches.

Regulators in Europe have also dragged their heels in issuing a reprieve from cumbersome model governance requirements, leaving firms having to independently validate and backtest standard IM models in the short term, and complicating credit support annex negotiations with counterparties. While vendors have used the time profitably to fine-tune tools and services, the confusion may hamper clients’ ability to use them.

With many phase five firms in limbo, this special report assesses the issues and key challenges involved, and reveals the changing strategies of firms in meeting their IM responsibilities.


Download the full special report in PDF format

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