6 December 2016
The Australian Prudential Regulation Authority (APRA) has announced its implementation timetable for the new requirements for margining and risk mitigation for non-centrally cleared derivatives.
The requirements are contained in Prudential Standard CPS 226 Margining and risk mitigation for non-centrally cleared derivatives (CPS 226), which was released in its final form in October 2016 without a commencement date. CPS 226 implements an important component of the G20’s post-crisis reforms aimed at reducing systemic risk in the over-the-counter derivatives market in Australia.
CPS 226 will commence on 1 March 2017, with a multi-year phase-in that reflects the internationally agreed timetable. The risk mitigation requirements in CPS 226 take effect from 1 March 2018.
APRA has also granted a six-month transition period for variation margin requirements, which commences on 1 March 2017. While all new transactions entered into from 1 March 2017 are in-scope for the variation margin requirements, the transition period will provide additional time for entities to finalise their implementation and reach full compliance for all transactions executed from 1 March 2017.
APRA considers that the implementation timetable in conjunction with the transition period appropriately balances the benefits of international consistency with the need for sufficient time for implementation.
A letter to industry setting out the full implementation timetable and an updated version of CPS 226 can be found on the APRA website at: www.apra.gov.au/CrossIndustry/Pages/Response-margining-risk-mitigation-October-2016.aspx
The Australian Prudential Regulation Authority (APRA) is the prudential regulator of the financial services industry. It oversees banks, credit unions, building societies, general insurance and reinsurance companies, life insurance, private health insurers, friendly societies, and most members of the superannuation industry. APRA currently supervises institutions holding $5.9 trillion in assets for Australian depositors, policyholders and superannuation fund members.
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