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Law360, London (April 3, 2020, 7:22 PM BST) -- Global financial regulators said Friday they would push back deadlines for new rules on non-centrally cleared derivatives by one year to help the finance industry cope with the upheaval of the COVID-19 outbreak.
The Basel Committee on Banking Supervision and the International Organization of Securities Commissions said some firms will not have to comply with new rules requiring companies to hold more cash against uncleared derivatives transactions until one year later than planned.
The watchdogs said the extension is a response to the disruption caused by the coronavirus outbreak, which has now infected over a million people worldwide.
The rules, known as the margin requirements for noncentrally cleared derivatives, will become effective for firms holding more than €50 billion ($55 billion) in September 2021 rather than September 2020, as scheduled. The new rules will hit companies holding more than €8 billion in September 2022.
The banking and securities regulators said that firms will be struggling with changes to staffing arrangements as well as the need to respond to the immediate risks associated with COVID-19-related market volatility.
They added that the new deadlines will allow financial services companies to respond to the crisis as well as prepare adequately with the requirements before the new regime hits.
The news comes after global standard-setters for banks, insurers and other financial services urged regulators to delay the new regime in March.
A letter published Wednesday by the International Swaps and Derivatives Association, a globally standard-setting body, urged IOSCO and the Basel Committee to push back the deadlines as it would be impossible for firms to meet the requirements amid the COVID-19 outbreak.
"Staff have been displaced and repurposed given the increased market volatility," warned the letter, signed by more than 10 trade associations including the Association for Financial Markets in Europe and Insurance Europe.
Initial margin requirements force participants in a noncentrally cleared derivatives contract to hold collateral when entering into a trade to cover credit risks.
The G-20, an international forum for economic policymakers, proposed the new rules in the aftermath of the 2008 financial crisis to protect the over-the-counter derivatives market.
--Additional reporting by Joanne Faulkner. Editing by Orlando Lorenzo.
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