Overview

The Uncleared Margin Rules (UMR) regulation is primarily meant to diminish the systemic risk of derivatives that manifested itself during the financial crisis.

The implementation of the UMR represents one of the most significant and transformational changes in the way derivatives counterparties calculate initial margin (IM) for non-centrally cleared derivatives by adopting a risk-based IM calculations paradigm and a bi-lateral collateral exchange mechanism.

The phase-in of margin rules is ongoing, with 120+ financial entities already in scope since September 2016, and 1000+ phase 5-6 financial entities coming into scope in 2021–2022, spanning across smaller banks, broker-dealers, asset managers, hedge funds, insurance companies, energy companies, etc.

Crisil has extensive experience in providing UMR related services to phase 1-4 clients, and our team is well-positioned to advise phase 5-6 clients on UMR compliance from educating stakeholders to designing UMR compliant bespoke CSAs/ACAs, AANA calculations, SIMM model implementation,  risk system changes, documentation, and governance process around SIMM model.

Insights and Updates