The Bank of England on procyclicality: no great solutions

The procyclicality and margin debate is one of those topics that reads like a damned if you do, damned if you don’t. Earlier this month the Bank of England published an interesting paper “An investigation into the procyclicality of risk-based initial margin models” (Financial Stability Paper No. 29 – May 2014) by David Murphy, Michalis Vasios and Nick Vause. We have some thoughts.