Global regulators delay new derivatives rule to September 2021

Wednesday, 24 July 2019 00:00 - - {{hitsCtrl.values.hits}}

LONDON (Reuters): Global regulators have delayed by a year the final phase of new rules that require smaller fund managers to set aside cash or margin to cover their derivatives transactions for the first time.

Regulators discussed postponing the measures at the Basel Committee meeting last month, after industry bodies said those affected needed more time to prepare.

Derivatives played a core role in the global financial crisis a decade ago, and new rules were agreed to require all market participants to back their trades with cash in case they turn sour.

The Basel Committee of global banking regulators and its counterpart for securities markets, IOSCO, said in a joint statement on Tuesday that progress has been made in rolling out the new rules for derivatives that do not pass through a clearing house.

However, the final phase of the rollout, covering over about a thousand smaller asset managers and other market participants whose exposures to non-cleared derivatives exceed 8 billion euros ($8.94 billion), has been postponed by 12 months to September 2021.

“The Basel Committee and IOSCO have agreed to this extended timeline in the interest of supporting the smooth and orderly implementation of the margin requirements,” the statement said.

The two bodies “expect that covered entities will act diligently to comply with the requirements by this revised timeline and strongly encourage market participants to make all relevant arrangements on a timely basis”, it added.

Regulators had been split over whether to grant a delay.

The International Swaps and Derivatives Association, an industry body, said the delay will reduce the risk of a compliance bottleneck next year and ensure that smaller firms have longer to make the necessary systems changes.