Guideline on the Margin Exchange Regime for Non-Centrally Cleared OTC Derivatives Transactions

This is the English text of the Financial Supervisory Service guideline that implements the BCBS–IOSCO margin requirements for non-centrally cleared derivatives in Korea. It is the operative document for any bank, securities firm, insurer or asset manager whose group runs KRW 3 trillion or more of uncleared OTC derivatives — and for their counterparties abroad. It sets the eligible collateral and haircut grid, the KRW 65 billion initial-margin threshold, the KRW 1 billion minimum transfer amount, the T+3 settlement deadline, and the conditions on which a quantitative model such as ISDA SIMM may be used. Issued in Korean only; not available in English elsewhere.

What's inside

• Ⅰ. General provisions — background, purpose, and the thirteen defined terms (variation margin, initial margin, CCP, netting agreement, threshold, minimum transfer amount, third party custodian, financial group, substituted compliance, aggregate month-end average notional amount)
• Ⅱ. Application — products covered and the carve-outs for physically settled FX forwards and swaps, cross-currency swaps, physically settled commodity forwards and covered-bond hedges; the KRW 3 trillion entry test; the phased implementation tables for initial margin (2017–2022) and variation margin (2017)
• Ⅲ.1 Eligible collateral and haircuts — the full grid: cash, gold, government and foreign government bonds and corporate investment-grade bonds by rating band and residual maturity, listed equities, and the additional 8% currency-mismatch haircut
• Ⅲ.2 Calculation of margin — the standardised model formula and standard margin rates by asset class; the approval conditions, calculation conditions and internal control requirements for a quantitative model; treatment of ISDA SIMM
• Ⅲ.3–5 — the KRW 65 billion threshold and its allocation across a financial group, the KRW 1 billion minimum transfer amount, gross versus net exchange, the T+3 settlement deadline, and the conditions for third-party custody and the prohibition on re-use of initial margin
• Ⅳ. Other matters — intra-group transactions, substituted compliance for transactions between financial companies established abroad, and dispute resolution procedures

Key figures at a glance