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October 21, 2013

Bilateral Posting of Initial Margin En Vogue Ahead of Regulation

Risk.net reports that a number of large derivatives dealers, including Bank of America, Barclays, Deutsche Bank, UBS and Citi, have started posting bilateral initial margin between each other.

These lump sums appear to be:

  • consisting mainly of less-liquid (or "lazy") assets,
  • sufficiently hair-cutted, and
  • intend to reduce risk-weighted assets (RWAs).

These agreements are being put in place well before the mandatory regulatory start proposed by the Basel Committee on Banking Supervision (BCBS) and the International Organization of Securities Commissions (IOSCO) in its recent document "Margin requirements for non-centrally cleared derivatives (BIS PDF)". This document touts a phase-in period for posting gross bilateral margin, starting December 2015 for the largest derivatives dealers.


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