The Ottawa-based Office of the Superintendent of Financial Institutions (OSFI) on Monday announced a new draft guideline establishing margin requirements for over-the-counter (OTC) derivatives that are not centrally cleared.
“These margin requirements will mitigate systemic risk in the financial sector as well as promote central clearing of derivatives where practicable,” OSFI says in a letter to federally regulated financial institutions.
The draft proposals are consistent with the provisions set out at the global level by the Basel Committee on Banking Supervision (BCBS), OSFI says, and will apply to federally regulated financial institutions.
The regulator’s objective with the proposed new guidance is to outline margin requirements that will support “the financial stability objectives of the international framework while giving due recognition to constraints imposed by Canada’s place in the global market,” says OSFI in a guildeline impact analysis statement.
“The guidance also takes into consideration the potential operational burden in relation to small and medium sized institutions which may have non-material exposure,” the statement adds.
Given the cross-border nature of the derivatives market, the guideline “may also support equivalency or comparability assessments of Canadian derivatives regulatory requirements by other jurisdictions,” OSFI says.
Comments are due by Nov. 27, and the guidance is slated to take effect on Sept. 1, 2016.