The Bank of England (the Bank) and the Commodity Futures Trading Commission (the CFTC) have co-chaired international work on centrally cleared margin practices stemming from the March 2020 market turmoil, also known as the ‘dash for cash’. The Basel Committee on Banking Supervision (BCBS), the Bank for International Settlements’ Committee on Payments and Market Infrastructures (CPMI) and the International Organization of Securities Commissions (IOSCO) today published their final report: “Transparency and responsiveness of initial margin in centrally cleared markets – review and policy proposals” which sets out policy proposals designed to increase the resilience of centrally cleared markets.

The Bank and the CFTC support the report’s findings, including the policy proposals which aim to improve centrally cleared market participants’ understanding of potential future margin requirements and margin responsiveness through enhanced central counterparty (CCP) and clearing member transparency and governance practices. Some of the key conclusions include the need for greater transparency on initial margin models (including through appropriate disclosures and the provision of enhanced margin simulation tools) and appropriate governance arrangements on the setting of initial margin requirements.

This report builds on the BCBS-CPMI-IOSCO report Review of margining practices published in September 2022 which identified six areas for further policy work in conjunction to the Financial Stability Board’s (the FSB) work programme on non-bank financial intermediation (NBFI). The Financial Policy Committee has supported work to reduce vulnerabilities through internationally coordinated reforms. This includes work on margining practices and leverage in NBFI which may contribute to sudden spikes in the demand for cash in stress, disrupting financial stability.

Highlighting the analytical efforts and industry consultations undertaken, the co-chairs Sasha Mills and Richard Haynes thanked the members of the ad hoc BCBS-CPMI-IOSCO margin group for their collaborative participation in finalising the policy proposals.

Sasha Mills, Executive Director, Financial Market Infrastructure, Bank of England, said:

"The international work on centrally cleared initial margin is a powerful example of addressing financial stability risks through international coordination across authorities and committees. The Bank will continue to support this work as standard-setting bodies consider how best to implement the proposals."

Richard Haynes, Deputy Director of Risk Surveillance, CFTC, said:

"The BCBS-CPMI-IOSCO margin group, by focusing on detailed data from a broad set of global regions, was able to sift between market rumours and reality, and achieve a balanced and pragmatic set of policy conclusions for implementation"