APRA opens margin requirement talks

Super funds and life insurers have two weeks to air their opinions on APRA's proposed amendments to its margin requirements for non-centrally cleared derivatives.

Consultation has opened for APRA-regulated entities to consult with the prudential regulator over proposed changes to Prudential Standard CPS 226 Margining and risk mitigation for non-centrally cleared derivatives (CPS 226) which would accommodate a global decision to delay the final implementation phase for margin requirements by one year to 1 September 2021.

After the Basel Committee on Banking Supervision (BCBS) and the International Organisation of Securities Commissions (IOSCO) clarified the documentation, custodial and operational requirements for initial margin do not apply in cases where the initial margin is below €50 million, APRA has proposed to clarify APRA-regulated entities are not required to have such processes in place for posting and collecting initial margin when the bilateral initial margin amount for a particular trading relationship is below the $75 million threshold.

Additionally, the prudential regulator proposes to add its UK counterpart, the Prudential Regulation Authority (PRA) and the Financial Conduct Authority to the list of foreign bodies eligible for substituted compliance with APRA's margin requirements in CPS 226 after Brexit.

Separately, APRA this week hit insurer Allianz with an additional capital requirement of $250 million, after gaps were identified by its governance risk self-assessment.

APRA said the extra capital requirement - the first applied to an institution outside the big four banks since the CBA prudential inquiry - would remain in place until its remediation work was complete and identified gaps were closed.

Read more: APRAMargin requirementsCPS 226Prudential StandardAllianzFinancial Conduct AuthorityFCAPrudential Regulation Authority
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