rules and regulations

As part of an investigation into the liquidity troubles faced by financial markets in the early stages of the Covid-19 pandemic, global standards setters are undertaking a consultation on margin calls during the crisis.

Global regulators for banks, securities markets and market infrastructure — including the Basel Committee on Banking Supervision, the Committee on Payments and Market Infrastructures (CPMI) and the International Organization of Securities Commissions (IOSCO) — have announced a joint industry survey that will examine a variety of margin-related issues that occurred in securities and derivatives markets during the turmoil of March 2020.

The research follows a review by the Financial Stability Board (FSB), which found that increased market volatility triggered margin calls that in turn led to a liquidity crunch.

The regulators’ initiative is part of a broader examination of liquidity shortfalls during the onset of the pandemic, and the regulators said that it will also feed into work on improving the resilience of the shadow banking sector — a project that’s being led by the FSB.

“The results of this work will be incorporated in the overall [FSB shadow banking] work and delivered to the G20,” the regulators said.

The deadline for responses to the margin call consultation is May 17.