On 10 December 2024, the Financial Stability Board (FSB) issued policy recommendations to enhance the liquidity preparedness of non-bank market participants for margin and collateral calls in centrally and non-centrally cleared derivatives and securities markets (including securities financing such as repo).

The policy recommendations are part of the FSB’s work programme on enhancing the resilience of non-bank financial intermediation and follows up on the findings of a review of margining practices conducted in 2022 by the Basel Committee on Banking Supervision and others.

The FSB’s eight policy recommendations cover liquidity risk management and governance, stress testing and scenario design, and collateral management practices of non-bank market participants, focussing on liquidity risks arising from spikes in margin and collateral calls during times of market-wide stress. The recommendations cover both centrally and non-centrally cleared derivatives and securities markets and apply to a broad range of non-bank market participants that may face margin and collateral calls, including insurance companies, pension funds, hedge funds, other investment funds, and family offices.

Annex 1 of the final report also provides an overview of existing rules and regulations. Annex 2 provides some examples of existing or in-train liquidity risk management rules and regulations relevant to margin and collateral calls. Annex 3 provides some illustrative examples which can serve as helpful guidance for the application of the recommendations.