Our client, a global bank, had to make a number of significant changes across a wide range of stakeholders’ workflows. This was a result of the phased introduction of bilateral margining rules (based on five layers of thresholds).
The main impact for the bank has been the obligation to post Initial Margin to a custodian for in-scope relationships.
The bank exceeded the threshold for phase two, and had to establish the impacted relationships and form a repapering and operations upgrade and a SIMM Model development plan, to ensure regulatory compliance by the deadline.
PwC assisted the client with phase three of the bilateral margin implementation and helped put together a plan to manage a significantly higher volume of in-scope relationships for phases four and five. Overall, PwC has been supporting the bank with the Initial Margin implementation for over 18 months.
PwC has assisted the bank in two phases of the Initial Margin implementation. For phase two, PwC was able to provide the bank with a team that had experience of the phase one implementation, gained at a tier one investment bank. PwC helped the client understand the initial margin process from a range of perspectives (legal, ops, commercial etc.) and helped the client form an effective governance structure for the process. The client has a small legal team in London and PwC was able to offer significant support to this function.
PwC helped raise awareness across the bank by facilitating a workshop on the Initial Margin requirements and governance at the client's European headquarters. The aim of the workshop was to help the client understand the upcoming requirements on phase three, four and five, particularly as these phases would require significant input from stakeholders worldwide.
If the deadlines are not met then contracting parties must cease to trade until the various elements of the process are complete. The client therefore benefited from being able to continue trading with all of its primary liquidity providers.
The client now has a defined operating model for client outreach, and PwC has continued to support this for phase three. Our focus is to support the governance of the phase three implementation along with assisting the legal team on the negotiations by providing the governance required to support the overall delivery of the project. PwC has also helped the client build a playbook to negotiate both the bilateral documentation and for forming collateral schedules.
Contract Solutions Lead, PwC United Kingdom
Tel: +44 (0)7826 946177