PRA and FCA consultation – amending Technical Standards for derivative margins

PRA and FCA consultation – amending Technical Standards for derivative margins

• On 9 March 2021, the Prudential Regulation Authority (PRA) and Financial Conduct Authority (FCA) launched a joint consultation on amending certain onshored Technical Standards that relate to margin requirements for non-centrally cleared derivatives
• This Consultation Paper is PRA CP6/21 and FCA CP21/7 with the title “Margin requirements for noncentrally cleared derivatives: Amendments to BTS 2016/2251”
• https://www.bankofengland.co.uk/prudential-regulation/publication/2021/march/margin-requirements-for-non-centrally-cleared-derivatives
• The PRA and FCA propose introducing or extending exemptions for some products subject to bilateral margining requirements
• The PRA and FCA also want to align implementation phases and thresholds of the initial margin requirements to international standards
• These proposals aim to maintain current market practice and give firms legal clarity on these margin requirements
• This CP is relevant to PRA-authorised firms that are financial counterparties for the purposes of Article 2 of EMIR and is also relevant to all FCA solo-regulated entities and non-financial counterparties in scope of the margin requirements under UK EMIR.

Impacts

This Consultation Paper (CP) sets out the Prudential Regulation Authority’s (PRA) and Financial Conduct Authority’s (FCA) proposals to establish or extend exemptions for some products subject to bilateral margining requirements, and to align implementation phases and thresholds to the Basel Committee on Banking Supervision (BCBS) and the International Organization of Securities Commissions (IOSCO) standards.

The PRA and FCA are proposing to amend BTS 2016/2251 using the making and amendment powers under Article 11(15) of EMIR and under Section 138P of the Financial Services and Markets Act 2000 (FSMA). These proposed changes would be effective on publication of the final technical standards instrument, which is planned for Thursday 1 July 2021.

Timeline with relevant dates to be logged on regulatory calendar

• Consultation closes on 19 May 2021

Next steps

The PRA and FCA invite feedback on the proposals set out in this consultation.

PRA-regulated firms should address any comments or enquiries to: CP6_21@bankofengland.co.uk.

FCA solo-regulated firms should address any comments or enquiries to cp21-07@fca.org.uk

If anyone has specific questions or needs any advice, contact our specialists.