On 11 December 2015, Financial Services Agency (FSA) as Japanese financial regulator released the 2nd consultative documents on margin requirements for non-centrally cleared derivatives.
On 11 December 2015, Financial Services Agency (FSA) as Japanese financial regulator released the 2nd consultative documents (available in Japanese) on margin requirements for non-centrally cleared derivatives with one month comment period.
New margin requirements are expected to come into force in September, 2016 with phased-in arrangements which are in accordance with BCBS/IOSCO announcement on March, 2015.
Comparing to the first proposal published on July 2014 which was very much in line with BCBS/IOSCO final report published on September, 2013, this second proposal has modified some parts of requirements which were different from jurisdictions such as US and EU.
The modifications contain “exchange” approach on margin instead of collection-only, no FX haircut to currency mismatch on cash collateral for variation margin, combined calculation with initial and variation margin for minimum transfer amount when there is still difference in treatment between jurisdictions for instance in the case of a trade with counterparties in the jurisdiction having insufficient legally netting arrangement.
In other words, the modifications include both eased areas such as the FX haircut and strengthed areas such as the exchange of margin.
Meanwhile, in a case of cross-border transaction, we still see some uncertainty that needs to be addressed.