Korean Regulator Publishes Draft ‘Guidelines On Margin Requirements For Non-Centrally Cleared OTC Derivatives Transactions'

INTRODUCTION

The Financial Supervisory Service (FSS) of Korea published the draft 'Guidelines on Margin Requirements for Non-Centrally Cleared OTC Derivatives Transactions'¹ (Guidelines) on 14 December 2016 and invited comments to be submitted by 2 January 2017. This forms part of global efforts to reduce systemic risk relating to OTC derivatives transactions and is aimed at implementing the 'Margin Requirements for Non-Centrally Cleared Derivatives' (Recommendations) published in March 2015.

The Recommendations and, by extension, the Guidelines, seek to reduce systemic risks inherent in OTC derivatives which are not centrally cleared through a central counterparty (CCP) by requiring all financial institutions and systemically important non-financial institutions to receive and deliver additional margin in respect of outstanding OTC derivatives transactions which are not cleared through a CCP.