On Apr. 17, ESRB issued response to Basel, IOSCO transparency plan.
ESRB published its response to the consultative report by Basel, CPMI and IOSCO on transparency and responsiveness of initial margin in centrally cleared markets.
Response aims to emphasize how the policy proposals in the consultative report would enhance transparency and contribute to mitigating potentially destabilizing developments associated with margin requirements, and suggest enhancements.
First part of response provides general considerations on topics discussed in report, including recent instances of instability underscoring role of margin requirements.
And overview of ESRB work in analyzing data on central counterparties (CCPs) and the role of transparency in monitoring systemic risks and fostering financial stability.
Second part of response sets out ESRB's replies to consultation questions, discusses the policy proposals, considers these would significantly enhance transparency.
But does not consider that transparency and preparedness alone with be enough to overcome challenges associated with destabilizing feedback loops between margin requirements, funding and market liquidity, especially in highly concentrated markets.
Must formulate additional, innovative policies aimed at reducing occurrence and adverse effects of such destabilizing spirals, will require analysis and new policies.
