Derivatives Alert: Extended Timeline for Initial Margin Phase 5 Announced

BCBS and IOSCO confirmed today that there will be a one year extension to the final implementation of phase 5 of the initial margin rules.

To facilitate the extension, the implementation deadline for covered entities with an AANA of over EUR 50 billion (or equivalent for other regimes) will be 1 September 2020. Covered entities whose AANA is below that level and above EUR 8 billion will not be required to exchange initial margin until 2021.

Investment managers whose fund’s AANA is close to the new 50 billion trigger level will now need to assess whether they are likely to remain in phase 5 (i.e. above 50 billion as at September 2020) or to come within the new phase 6 in September 2021. It remains to be seen how much relief this will afford in terms of number of relationships which will come out of scope in 2020.

European and global regulators will now need to adopt these revised BCBS-IOSCO principles and in the near term to provide the expected relief (in the form of interim forbearance) to market participants.

View the joint statement: Margin requirements for non-centrally cleared derivatives.

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