Banking (prudential standard) determination No. 2 of 2025
Adjustments for different holding periodAdjustments for different holding periods and non-daily mark-to-market or remargining
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Adjustments for different holding periods and non-daily mark-to-market or remargining
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An ADI must apply the minimum holding periods and conditions in Table 24 to SFTs, other capital-market-driven transactions (e.g. OTC derivative transactions) and secured lending.
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Minimum holding periods and conditions
| Transaction type | Minimum holding period (business days) | Condition |
|---|---|---|
| SFTs | 5 | Daily remargining |
| Other capital market transactions | 10 | Daily remargining |
| Secured lending | 20 | Daily revaluation |
- Under the following circumstances, an ADI must apply a higher minimum holding period:
- for all netting sets where the number of trades exceeds 5,000 at any point during a quarter, an ADI must set the minimum holding period to 20 business days for the following quarter;
- for netting sets containing one or more trades involving either illiquid collateral, or an OTC derivative that cannot be easily replaced, an ADI must set the minimum holding period to 20 business days. An ADI must determine both liquidity and ease of replacement in the context of stressed market conditions; and
- if an ADI has experienced more than two margin call disputes on a particular netting set over the previous two quarters that have lasted longer than the applicable minimum holding period (before consideration of this provision), the ADI must use a minimum holding period that is at least double the supervisory floor for that netting set for the subsequent two quarters.
In determining the holding period, an ADI must consider whether trades or securities it holds as collateral are concentrated in a particular counterparty and whether, if that counterparty exited the market precipitously, the ADI would be able to replace its trades.
- An ADI must calculate the margining frequency adjustment factor for a transaction or netting set as:
Start formula A equals square root of start fraction N subscript R plus open round bracket T subscript M minus 1 close round bracket over 10 end fraction end formula.
where:
TM is the minimum holding period for the type of transaction determined in accordance with paragraphs 30 to 31 of this Attachment
NR is the number of business days between remarginings or revaluations.