Coronavirus - Deferral of Phases 5 and 6 of initial margin requirements for uncleared OTC derivatives recommended by BCBS and IOSCO

Eversheds Sutherland (US) LLPOn April 3, 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. The statement issued by BCBC and IOSCO is available here.

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

New implementation timetable

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

September 1, 2021

Phase 6 > €50 billion > €8 billion

September 1, 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 that requested the suspension of the timetable for initial margin phase-in. The suspension was requested 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. The advocacy letter sent by ISDA is available here.

BCBS and ISCO have published a revised version of the margin requirements on their website, available here.

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 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 available here.

In collaboration with Eversheds Sutherland attorneys Richard J. Batchelor, Jonathan D. Master and Paul Denham.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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