Reforms that were adopted in the derivatives markets in response to the global financial crisis have succeeded in bolstering the resilience of those markets, enabling them to weather recent episodes of market stress, global regulators say.
The umbrella groups for global banking and securities regulators — the Basel Committee on Banking Supervision and the International Organization of Securities Commissions — published a joint report today examining the implementation of margin requirements for non-centrally cleared derivatives, which found that the amount of margin has “increased materially” since the crisis, enhancing the resilience of the global financial system.
Global policymakers first introduced minimum standards for margin requirements for non-centrally cleared derivatives in 2013, following the financial crisis, which exposed systemic vulnerabilities in the over-the-counter (OTC) derivatives markets.
In response, policymakers pushed for greater exchange trading and centralized clearing for standardized OTC derivatives, adopted trade reporting requirements and called for non-centrally cleared derivatives to face higher capital and margin requirements.
However, the final margin requirements weren’t fully implemented until late 2022, and the regulators said that the implementation process, “is now generally in a steady state.”
“The assessment marks a milestone in the ongoing monitoring of the standard introduced in response to the 2011 G20 call to enhance the resilience of financial markets,” the regulators said.
In their report, the regulators noted that their review didn’t raise any material concerns with the adoption of the margin reforms — and that, as a result, they are not seeking any changes to the framework.
“The framework has been effective in supporting the intended functioning of capital and centrally cleared margin frameworks, including during recent episodes of market stress,” they concluded.
Nevertheless, the regulators did recommend that the markets remain subject to ongoing supervisory oversight.