BoE call to extend minimum margins
Monday 24 October 2011 - by Karina Whalley
The Bank of England has called for minimum initial margin requirements to extend beyond over the counter derivatives contracts amid a bid to get the EU's draft Emir regulation amended.
"We need to be able to vary any minima as threats to stability evolve, crudely, cyclically," explained the Bank of England deputy, speaking at a European Commission conference in Brussels.
He also called on those drafting the European Market Infrastructure Regulation to accommodate these measures in the text.
"You will recognise in this an echo of the plans for varying bank capital requirements. As a contribution to that, Emir should make explicit provision for macroprudential tools [including capital and margin requirements]," he said.
"It is not too late for Europe to lead the world in this area on macroprudential policy," urged the Bank of England deputy governor.
Tucker also stressed the need for effective resolution regimes for central counterparties as well as other financial market infrastructure. He said the consequences for not having an orderly bankruptcy plan in place when CCP's fail could be worse than major banks' going bankrupt.
He warned: "There is a big gap in the regimes for CCPs. What happens if they go bust? I can tell you in a simple answer, mayhem, as bad as, conceivably worse than, the failure of large and complex banks."
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