FSB proposes actions to make margin calls safer

Margin calls can mitigate risk but may also create spikes of liquidity demand, report says

The Bank for International Settlements, Basel
The Bank for International Settlements, Basel
Photo: Ulrich Roth

The Financial Stability Board (FSB) has laid out eight actions that could reduce the financial instability created by margin and collateral calls in a report published today (April 17).

The FSB says while margin calls are a “necessary protection” against counterparty risk, they can also lead to sudden increases in liquidity demand, particularly during bouts of stress.

“The increase in such calls can impact market participants differently depending on size of positions and level of liquidity

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