Eighteen years on from the global financial crisis of 2008, the rollout of central clearing, margining of non-cleared derivatives trades and higher capital requirements has completely reshaped derivatives trading and risk management. But effective regulation requires regular monitoring to ensure the rules are working as intended, without adverse consequences for financial markets and the broader economy. Sometimes, fine-tuning may be needed to improve the calibration of the rules.

This edition of IQ shines a light on several areas of the post-crisis regulatory framework where recalibration is on the cards. The first is the completion of Basel III in key jurisdictions. In the US, regulators published a new proposal on March 19 that makes significant improvements, but some further adjustments may be needed to achieve an appropriate, risk-sensitive capital framework. In the UK, the Basel 3.1 framework was finalised in January for implementation at the start of 2027, but the Prudential Regulation Authority has delayed the internal models approach for market risk by one year to allow more time to get the calibration right.

One of the more subtle changes since the financial crisis is that central clearing and margin requirements have drawn securities financing transactions (SFTs) and derivatives markets closer together. In a recent whitepaper, ISDA made a series of recommendations for adjustments to the prudential framework to better reflect the secured, short-dated and collateralised nature of SFT exposures.

One area of the post-crisis regulatory framework that has been particularly challenging has been trade reporting, with inaccuracies, duplication and delays in reported data. Recent consultations from EU and UK regulators on ways to simplify, streamline and reduce the burden of reporting could be a positive step forward. As the rules are improved, ISDA’s Digital Regulatory Reporting initiative enables firms to reduce the cost and burden of implementation, while improving the accuracy and consistency of reported data.

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