Fenergo, the leading provider of Client Lifecycle Management solutions for investment, corporate and private banks, has today announced significant enhancements to its module for Margin Requirements for Non-Centrally Cleared OTC Derivatives.
Fenergo Margin Requirements is an advanced, rules-based compliance solution designed to help financial institutions meet the varying degrees of regulatory demands of Margin Requirements across the world. The solution combines rules, workflow processes and data requirements designed in partnership with the banking community.
Margin Requirements for Non-Centrally Cleared OTC Derivatives regulation aims to reduce systemic risk in the non-centrally cleared OTC derivatives markets by ensuring appropriate collateral is available to offset any losses caused by a counterparty default. However, it is anticipated that this latest compliance requirement will pose significant regulatory and operational challenges for financial institutions striving to implement solutions against tight regulatory deadlines.
According to Laura Glynn, Fenergo’s Global Regulatory Affairs Manager, “From a client management compliance perspective, there are three core operational challenges facing financial institutions in meeting the Margin Requirement obligation. The first one comes down to identifying and classifying the client population in-scope for this regulation. The second involves determining the data and documentation required to evidence the compliance demand. Given the fact that the regulation necessitates changes to existing trade documentation, the third challenge involves orchestrating a regulatory client outreach process to collect new or outstanding data and documentation from clients. On top of this, global banks need to ensure compliance with all the different and staggered deadlines across the world, as well as understanding the equivalence determination (yet to be decided)”.
The regulatory obligation, which has been implemented in the USA, Canada and Japan for initial margin obligations since September 2016, will introduce a requirement for variation margin for these countries in March 2017. The final European RTS entered into force on the 4th January. Phase 1 requirements will apply variation margin and initial margin from February 4th, 2017, with variation margin applicable for all other entities from the March 1st, 2017. Meanwhile, Hong Kong, Singapore and Australia are forging ahead with a March 1st, 2017, regulatory commencement date for Margin Requirements, with Switzerland likely to commence at some point during the first quarter of 2017.
Fenergo has been working closely with its community of banking clients to put in place a solution that meets the demands of Margin Requirements rules from the outset. The firm’s team of regulatory analysts have been actively tracking the regulations on a global basis and translating them into an automated solution that will ease the operational and regulatory burden it may pose.
By automating this process, Fenergo Margin Requirements is designed to make complying with Derivative Margin obligations (in addition to a wide range of regulatory requirements), as efficient and effective as possible, speeding up the time it takes to achieve compliance, onboard clients / new products and improve client satisfaction and overall time to revenue.