Financial firms and systemically important non-financial entities that collect or post margin on uncleared derivatives follow their national rules. The international standard behind those rules is the BCBS-IOSCO margin requirements.

What the standard is for

The BCBS-IOSCO margin requirements set a minimum standard that national rules follow for the margin on derivatives that do not pass through a central counterparty. They have two aims. The first is to reduce systemic risk by covering, with collateral, the loss when a counterparty to an uncleared trade defaults. The second is to encourage central clearing by making the margin reflect the higher risk of uncleared trades1.

The standard was developed by the Basel Committee on Banking Supervision (BCBS) and the International Organization of Securities Commissions (IOSCO). In 2011 the G20 made margin requirements part of the reforms and asked the two bodies to develop an internationally consistent standard2. The G20 agreement as a whole is covered in The G20 OTC Derivatives Reforms.

Capital and margin both limit risk, but they differ in who bears the loss. Margin covers the loss with collateral posted by the party that defaulted. When capital covers the loss, the party that suffered the default uses its own resources3. Capital also supports the whole of a firm's activity in one pool, so it tends to shrink under stress, whereas margin can be adjusted to the risk of each set of trades3.

Requiring margin carries a burden: collecting high-quality, liquid collateral. The framework includes four features to limit this burden: an initial margin threshold, broadly eligible collateral, permission to re-use initial margin, and phased implementation4.

How the framework came about, and its eight principles

In October 2011, the BCBS and IOSCO set up a joint working group. They issued a first consultative paper in July 2012 and a second, close to the final version, in February 2013. The final framework was published on September 2, 201325. After publication, the BCBS and IOSCO revised the implementation schedule and then extended it again in 2019 and 2020.

The framework sets out its elements in eight principles6.

Principle Content
1 Appropriate margin practices are put in place for all derivatives that are not centrally cleared
2 Covered entities (all financial firms and systemically important non-financial entities) exchange initial margin and variation margin on uncleared trades, according to counterparty risk
3 The calculation methods are consistent among covered entities. Initial margin reflects potential future exposure and variation margin reflects current exposure, and both cover the risk with a high degree of confidence
4 Collateral is liquid and holds its value after haircuts in times of stress
5 Initial margin is exchanged gross and held so that it is immediately available when the counterparty defaults, and so that, if the party that collected it becomes insolvent, the party that posted it is protected to the fullest extent possible under applicable law
6 Trades within the same group are also subject to appropriate margin requirements, consistent with the legal framework of each jurisdiction
7 The regulatory frameworks are coordinated so that they are consistent across jurisdictions and do not overlap
8 Requirements are phased in over an appropriate period to limit transition costs. After introduction, their effectiveness is assessed in a coordinated way

The framework is an international minimum standard, and the authorities of each country implement it by putting national rules in place7. Japan's rules are covered in Margin Requirements for Uncleared Derivatives.

Trades and parties covered

The framework covers all derivatives that are not centrally cleared. As exceptions, FX forwards and FX swaps that involve physical delivery, and the physically settled FX transaction that accompanies the exchange of principal in a currency swap, are outside the scope of initial margin. Variation margin on these follows a standard based on the Basel Committee's guidance for managing FX settlement risk. Variation margin on currency swaps applies to all parts, including the exchange of principal8.

The covered entities are all financial firms and systemically important non-financial entities6. Initial margin is required of those belonging to a group whose total average notional amount (AANA) of uncleared derivatives exceeds a threshold amount. The threshold was lowered in steps (see the next section). In calculating the final-phase threshold (1.1 trillion yen in Japan's rules), transactions equivalent to forward FX transactions are also counted. Japan's Financial Services Agency (FSA) explains that Japan's rules include these because the final report provides the same9.

Figure 1 applies the conditions so far in order.

YesNoIs the trade uncleared?Outside theframeworkYesNoIs the party trading afinancial firm or asystemically importantnon-financial entity?Not a coveredentityNoYesIs the trade anexception, such as aphysically settled FXforward?No initialmargin;variationmargin apartYesNoDoes the party's groupAANA exceed thethreshold for the phaseof application?No initialmargin;variationmargin apartWithin initial margin
Figure 1Order of questions for the framework and initial margin scope
Figure description

The figure checks whether the framework and initial margin apply, through four questions in order. A "no" at question 1 means outside the framework, a "no" at question 2 means outside the covered entities, and a "yes" at question 3 or a "no" at question 4 means outside initial margin. Question 3 checks for exempt transactions such as physically settled FX forwards and FX swaps, which are outside initial margin. If all are passed, initial margin applies, and variation margin is judged separately even when initial margin does not apply.

Consider a hypothetical example in which the final phase applies (from September 1, 2022, with a threshold above EUR 8 billion). Company F is a financial firm on the same terms as Bank E, with the same group AANA, and the determination is made for each party that trades.

Hypothetical trade Condition that applies Initial margin
Bank E (a financial firm) enters into an uncleared interest rate swap with Company F. The group AANA is EUR 10 billion The AANA exceeds EUR 8 billion (the trade is uncleared, the party is covered, and there is no exception) Within scope
Bank E enters into a physically settled FX forward with Company F. The group AANA is the same EUR 10 billion A physically settled FX forward is an exception Outside scope (variation margin follows the standard based on the guidance on FX settlement risk)
Bank E enters into an uncleared interest rate swap with Company F. Bank E's group AANA is EUR 5 billion The trade is uncleared, the party is a covered entity, and the trade is not an exception, but the AANA does not exceed EUR 8 billion Outside scope (variation margin is determined separately)

What is required for initial margin and variation margin

Variation margin is exchanged in line with the current exposure of a set of trades, that is, the change in market value. Initial margin is set in line with the potential future exposure of a set of trades. Both are calculated to cover all counterparty risk with a high degree of confidence6. National rules set initial margin and variation margin in line with this standard.

Initial margin has the following features.

Item What the framework says
Form of exchange Exchanged gross6
Segregation Held so that it is immediately available when the counterparty defaults, and so that, if the party that collected it becomes insolvent, the party that posted it is protected to the fullest extent possible under applicable law6
Threshold A uniform threshold of EUR 50 million is allowed; below it, a party may choose not to collect initial margin5
Re-use Allowed once only, under strict conditions5
Collateral Broad types of collateral that meet the initial margin requirements is allowed5
Calculation For each set of trades, there is a model-based method and a standardized-schedule method10

The threshold is an option not to collect. Consider a hypothetical example in which the initial margin required is EUR 30 million, below the EUR 50 million threshold. The collecting party may choose not to ask for it. If it does not ask, the posting party avoids the liquidity burden of preparing collateral. On the other hand, compared with the case in which it is required, less collateral is available if the counterparty defaults.

Initial margin models continue to be developed by industry. The BCBS and IOSCO said they would work with industry so that the models fit the framework, but that they do not inspect or approve individual models11. One model used across industry is the SIMM.

Collateral is valued after deducting a haircut. Principle 4 requires collateral to be highly liquid and to hold its value after haircuts under stress6. Collateral agreements include a minimum transfer amount, which spares the parties from exchanging small amounts.

Phases and dates of application

When the final framework was published in September 2013, the exchange of initial margin was due to begin in December 2015 and to be phased in over four years5. The revision of March 18, 2015, delayed the start of initial margin by nine months to September 1, 2016, and shifted the whole set of phases by nine months. Variation margin was to begin on September 1, 2016, with a six-month phase-in so that the largest parties came first11.

The sequence of dates is shown in Figure 2.

September 2,2013The final framework is publishedMarch 18,2015The implementation schedule isrevisedSeptember 1,2016Application begins for initial andvariation marginJuly 23,2019The BCBS and IOSCO agree to extendthe final phase by one yearApril 3,2020They agree to extend the two finalphases by a further yearSeptember 1,2022The final phase of applicationbegins
Figure 2Dates from publication of the framework to the final phase
Figure description

The figure arranges the dates from publication of the final framework to the last phase-in stage from oldest to newest. The milestones are publication, the start of application, and the start of the final phase-in stage. In between there is a revision of the implementation schedule and two agreements to delay the final phases. The spacing is not proportional to the length of time.

The table below gives the application start dates in the March 2015 revised table, reflecting the postponement of April 2020. The threshold is the group's AANA (total average notional amount).

Start of application Initial margin Variation margin
September 1, 2016 AANA above EUR 3 trillion AANA above EUR 3 trillion
March 1, 2017 - All other covered entities
September 1, 2017 Above EUR 2.25 trillion -
September 1, 2018 Above EUR 1.5 trillion -
September 1, 2019 Above EUR 0.75 trillion -
September 1, 2021 Above EUR 50 billion -
September 1, 2022 Above EUR 8 billion -

For the phases from 2016 to 2019, the test uses the average of the month-end notional amounts for March, April, and May of that year11.

In the March 2015 revised version, the phase for above EUR 8 billion was September 1, 2020, and there was no entry for the phase above EUR 50 billion11. On July 23, 2019, the BCBS and IOSCO agreed to extend the implementation of the final phase by one year12. On April 3, 2020, the BCBS and IOSCO, in view of the spread of COVID-19, extended the deadlines of the two final phases by a further year. As a result, the phase above EUR 50 billion became September 1, 2021. The phase above EUR 8 billion became September 1, 2022. The last two rows of the table above show these postponed dates13.

The start of the final phase in September 2022 is also confirmed in the Financial Stability Board (FSB)'s 2022 report14.

Reviews since 2019 and the state of implementation

The revised version that the BCBS and IOSCO published at the time of the April 2020 postponement made no substantive changes apart from the dates13.

The developments since 2022 are taken from the FSB's 2022 report and its 2024 and 2025 annual reports. In September 2022, the BCBS, the Committee on Payments and Market Infrastructures (CPMI), and IOSCO published a report reviewing margining practices in cleared and uncleared markets15. In early 2024, the BCBS and IOSCO issued a consultative document on simplifying variation margin handling in uncleared markets and on initial margin model responsiveness. The planned finalization was the end of 202416. According to the 2025 annual report, the BCBS-IOSCO recommendations for uncleared markets focus on simplifying the handling of variation margin and on ensuring the responsiveness of initial margin17. The report published by the BCBS, CPMI, and IOSCO in January 2025 complements the FSB's liquidity preparedness recommendations17.

In the reports of the FSB, the timing of implementation differed by jurisdiction. The FSB's June 2017 review said that the variation margin requirements were fully in force in 13 jurisdictions in March 2017. Some jurisdictions still had transitional measures after that18. In the November 2022 report, the margin requirements for uncleared trades were in force in 16 of the 24 FSB member jurisdictions, two-thirds, unchanged from the 2020 report1419. The same report describes the state of each jurisdiction as follows20.

Jurisdiction The FSB's November 2022 report
China Rules that apply to all securities firms dealing in OTC swaps are in force
India A June 2022 circular made the exchange of variation margin mandatory from May 2023. For initial margin, draft guidelines were put out for comment
South Africa In February 2022, implementation was extended by 12 months to February 2023, owing to concerns about buy-side readiness and the need to strengthen monitoring of the use of non-cash collateral
Indonesia The comment period has closed, and Bank Indonesia and the OJK are adjusting the timing of implementation and the AANA threshold
Mexico, Turkey Adoption or implementation is planned for 2023

The BCBS and IOSCO say they will assess the coordination of national rules after introduction, in order to keep the framework internationally consistent6.

Practical impact

A covered entity compares its group AANA with the threshold for the phase of application to determine whether it exchanges initial margin13. Where it does, the margin is exchanged gross. It is held so that it is immediately available when the counterparty defaults and, if the party that collected it becomes insolvent, protects the party that posted it to the fullest extent possible under applicable law6. If the amount required is below EUR 50 million, a party may choose not to collect it5.

What this page does not cover

Haircut rates, the list of eligible collateral, the details of how the threshold is measured, and the standardized schedule for initial margin are not covered on this page. Neither are the finalization planned for the end of 2024 or differences among the US, the EU, and the UK in threshold amounts and similar figures.

Notes

  1. Basel Committee on Banking Supervision and International Organization of Securities Commissions, "中央清算されないデリバティブ取引に係る証拠金規制 ＜要旨＞（仮訳）" (Margin requirements for non-centrally cleared derivatives: summary, provisional translation by the Financial Services Agency, our translation of the title), page 3, "Objectives of the margin requirements for non-centrally cleared derivatives" (in Japanese). ↩

  2. The same summary, page 2, "Background." ↩ ↩2

  3. The same summary, page 4, "Margin and capital." ↩ ↩2

  4. The same summary, page 5, "Liquidity impact of the margin requirements." The threshold is dealt with in Element 2, eligible collateral in Element 4, re-use in Element 5, and phased implementation in Element 8. ↩

  5. BCBS and IOSCO, press release "中央清算されないデリバティブ取引に係る証拠金規制" (Margin requirements for non-centrally cleared derivatives, our translation of the title) (September 2, 2013; provisional translation by the Financial Services Agency), pages 1–2 (in Japanese). ↩ ↩2 ↩3 ↩4 ↩5 ↩6

  6. BCBS and IOSCO, "中央清算されないデリバティブ取引に係る証拠金規制 ＜要旨＞（仮訳）" (summary of the margin requirements for non-centrally cleared derivatives, our translation of the title), pages 5–7, "Key principles and requirements," Principles 1–8, and "Monitoring and review" (in Japanese). ↩ ↩2 ↩3 ↩4 ↩5 ↩6 ↩7 ↩8

  7. The same summary, page 8, "Monitoring and review," the second-to-last paragraph. ↩

  8. BCBS and IOSCO, press release "中央清算されないデリバティブ取引に係る証拠金規制" (September 2, 2013; provisional translation by the Financial Services Agency), pages 1–2 (in Japanese). ↩

  9. Financial Services Agency, "コメントの概要及びコメントに対する金融庁の考え方" (Summary of the comments and the Financial Services Agency's views on them, our translation) (December 11, 2015), No. 48 (printed page 8, PDF page 10) (in Japanese). The FSA's answer is that Japan's rules follow the final report, and that the report provides that transactions equivalent to forward FX transactions are also counted in measuring the initial margin threshold. ↩

  10. BCBS and IOSCO, "中央清算されないデリバティブ取引に係る証拠金規制 ＜要旨＞（仮訳）" (summary), page 7, "Monitoring and review." The monitoring group is to examine whether the model-based and standardized-schedule approaches can be coordinated. ↩

  11. BCBS and IOSCO, press release "中央清算されないデリバティブ取引に係る証拠金規制の実施時期の改訂の公表" (Announcement of the revision of the implementation timetable for margin requirements for non-centrally cleared derivatives, our translation of the title) (March 18, 2015; provisional translation by the Financial Services Agency), page 1 and the table of changes to the timetable on page 2 (in Japanese). ↩ ↩2 ↩3 ↩4

  12. Financial Services Agency, "BCBS（バーゼル銀行監督委員会）及びIOSCO（証券監督者国際機構）による、中央清算されないデリバティブ取引に係る証拠金規制の最終フェーズ実施の1年延長の合意について" (On the agreement by the BCBS and IOSCO to extend by one year the implementation of the final phase of the margin requirements for non-centrally cleared derivatives, our translation) (July 24, 2019) (in Japanese). The agreement was published on July 23. ↩

  13. Basel Committee on Banking Supervision and International Organization of Securities Commissions, press release of April 3, 2020 (provisional translation by the Financial Services Agency), "バーゼル銀行監督委員会及びIOSCO は、中央清算されないデリバティブ取引に係る証拠金規制の最終フェーズ実施の延期を表明" (The BCBS and IOSCO announce a postponement of the implementation of the final phase of the margin requirements for non-centrally cleared derivatives, our translation of the title), page 1 (in Japanese). ↩ ↩2 ↩3

  14. Financial Stability Board, "OTC Derivatives Market Reforms: Implementation progress in 2022" (November 2022), pages 1 and 5, "Margin requirements for non-centrally cleared derivatives." ↩ ↩2

  15. The same report, page 7. The report's own footnote 19 cites the BCBS, CPMI, and IOSCO "Review of margining practices" (September 2022). ↩

  16. Financial Stability Board, "Promoting Global Financial Stability: 2024 FSB Annual Report" (November 18, 2024), page 14 (PDF page 18). ↩

  17. Financial Stability Board, "Promoting Global Financial Stability: 2025 FSB Annual Report," page 24. ↩ ↩2

  18. Financial Stability Board, "Review of OTC derivatives market reforms" (June 2017), 3.2.4 "Collateralisation of non-centrally cleared derivatives" (page 20). ↩

  19. Financial Stability Board, "OTC Derivatives Market Reforms: Implementation progress in 2022" (November 7, 2022), the web page. The report is described as tracking implementation across the "24 FSB member jurisdictions." ↩

  20. The same report, page 5, "Margin requirements for non-centrally cleared derivatives." The state of China, India, South Africa, Indonesia, Mexico, and Turkey. ↩ ↩2