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Derivatives Alert: Phase 5 IM Relief Confirmed


After some days of increasing speculation, BCBS and IOSCO have today confirmed that there will be a delay to final implementation of phase 5 of the initial margin rules. There will in effect be a split implementation for covered entities, with those with an AANA of over 50 billion (USD, EUR or equivalent for other regimes) remaining on track for 1 September 2020 and those below that level (and above 8 billion) not being required to exchange initial margin until 2021.

This will clearly be a relief to many market participants. Those at the cusp of the new 50 billion trigger level will now need to assess whether they are in phase 5 or the new phase 6. Those who remain in phase 5 (and of course those who were in earlier phases) will also need to undertake a new outreach to their counterparties to re-assess which pairings are in 2020 and which will now be in 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.

The local rule makers around the globe will now need to move quickly to adopt these revised BCBS-IOSCO principles if this is to provide the expected relief to market participants.

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

For more information about IM implementation or the implications of this alert, please do contact us.