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.