In diagnosing triggers of the Global Financial Crisis (GFC), a myriad of causal factors have been debated and scrutinized. Although it is far too simple to identify one catalyst of the GFC, it is evident that
I. Reduction of Systemic Risk
II. Promotion of Central Clearing
The implications of such regulation will be vast: structurally, physically and financially. To support financial institutions in the Asia Pacific region, this paper examines three primary considerations: one factor did stoke the contagion flame - perhaps more than any other - and that was the role of derivatives.
In 2011, the Group of 20 (G20) agreed to add margin requirements on non-centrally cleared derivatives to the OTC reform program. The international forum called upon the Basel Committee on Banking Supervision (BCBS) and International Organization of Securities Commissions (IOSCO) to develop global standards to meet two core goals:
I. Highlight the key components of the Uncleared Margin regulation.
II. Identify the subsequent challenges facing regional financial institutions.
III. Evaluate what is required to ensure compliance, and furthermore, to avoid the substantial impact that comes with failing to meet the global deadlines.
With less than a year before the uncleared margin rules are imposed, banks need to adequately brace themselves. APAC banks – who appear incredibly vulnerable to being blindsided by global measures – must educate themselves on the looming change and ensure they are fully compliant to change and timelines.
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