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Aussie IM Phase 4 double whammy

Opinions obviously vary, but for me there are very few opportunities to be glad not to be Australian. Here is one for already punch-drunk IM lawyers and compliance personnel.

The largest four banks in New Zealand are Australian-owned- ANZ, ASB, BNZ and Westpac. New Zealand is not a G20 member and has therefore been (relatively) immune to margin regulation fever and legal impediments prevented early access to the margining club- note that only IM is affected. In the normal course of things, Australian banks would have been obliged to comply with BCBS/IOSCO margin rules in respect of their qualifying New Zealand Business. However, in common with other regulators, the Australian margin rules (CPS 226) sensibly exempt transactions in jurisdictions where compliance is not legally possible. In July 2018 the New Zealand cabinet published a consultation on amending aspects of domestic law, resolution stay and security interest hierarchy, to enable margining. A bill to this effect is currently being drafted and is expected to enter into force in July 2019 with immediate effect.

Once margining becomes legally possible in New Zealand, the CPS 226 exemption will no longer be valid. The application of New Zealand’s rules is likely to coincide with the high point of phase 4 activity, significantly adding to the workload of affected banks.

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