Dampening pro-cyclicality in margin

The Committee on the Global Financial System has released a proposal recommending changes to dampen pro-cyclicality in margin practices and haircuts for securities financing and over-the-counter derivatives. How could this affect collateral management processes? By Christopher Whittall

Pro-cyclicality has become public enemy number one for regulators over the past three years. Everything from accounting standards to capital requirements have been blamed for fuelling the fire of the financial crisis. These concerns are not new. Practices around collateral – whether in securities financing or over-the-counter derivatives – have long been identified as exacerbating the more extreme