Tuesday 23 July 2019 7:14 pm

Regulators delay introduction of new tougher rules on derivatives after industry pleas

Global regulators have delayed the introduction of new rules that would require smaller fund managers to set aside cash to cover their derivatives transactions.

The Basel Committee on Banking Supervision (BCBS) and the International Organisation of Securities Commissions (IOSCO) said today the new rules would be
implemented from September 2021, a delay of a year.

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Phase five of the rules would mean that institutions with derivatives with a notional value of more than €8bn (£7.1bn) would have to comply with the new tougher regulations.

The delay to the implementation of the rules follows warnings from industry bodies of a bottleneck as the greatly expanded number of institutions affected scramble to comply with the new regulations.

Claude Brown, a derivatives partner at law firm Reed Smith, said: “The problem is the threshold drops from €750bn to €8bn so you have a potential universe of 7,000 new initial margin relationships to put in place.”

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The regulators said they had “agreed to this extended timeline in the interest of supporting the smooth and orderly implementation of the margin requirements.”

The rules are intended to ensure institutions have the cash to cover derivatives trades if they go wrong.

Chief executive of the International Swaps and Derivatives Association, Scott O’Malia, said: “The decision by BCBS/IOSCO to split the phase-five implementation over two years will reduce the risk of a compliance bottleneck in September 2020, and will help ensure smaller firms will have longer to get the necessary systems and processes in place.”

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