BNP Paribas Securities Services is expanding its collateral management services in Asia Pacific, to include initial margin requirements arising for non-cleared OTC derivatives positions.
Initial margin rules for non-cleared derivatives transactions started to phase in from September 2016, with the sixth and final phase set for September 2022 after a year-long deferral in April 2020.
"Asset owners can have a challenging time when implementing initial margin requirements due to the size of their derivative positions and the fact that they tend to operate under one single consolidated entity," BNP Paribas Securities Services head of product collateral access David Beatrix said.
"Asset owners also tend to delegate their investment process across multiple managers, which can result in fragmented initial margin calculations leading to higher collateral requirements. Our services take the complexity out of the process, enabling asset owners to centralise their calculations and adopt a streamlined and efficient approach to initial margins implementation."
Traditionally, initial margin requirements on bilateral transactions were negotiated on a case-by-case basis without prescriptive regulation.
However, this changed in 2016 as Basel Committee on Banking Supervision (BCBS) and the International Organization of Securities Commissions (IOSCO) set guidelines for initial and variation margin.
For Australia, institutions with $75 billion in assets must comply with the framework by September 2021 and those with $12 billion must comply with it by September 2022.
APRA's margining requirements for non-centrally cleared derivatives are published in prudential standard 226.