With a career spanning over three decades, industry veteran Ed Corral of J.P. Morgan has decided to step down. The move will see George Rennick become global head of J.P. Morgan’s Tri-party Agency Services business, effective as of October.
A leadership change looks to provide J.P. Morgan with a “fresh perspective”, allowing the firm to take a step back, ponders Rennick.
The bank will use this opportunity to develop a strategic vision focused on where the triparty and collateral services product needs to be in a few years’ time, accounting for new market structures, regulatory changes, market expansion and new asset classes such as digital assets.
“It is very early days, but I am extremely fortunate to be moving into a leadership position for a very strong global team and a robust product. It is a nice position for me to be in, client relationships are strong, the business is on a great growth trajectory, and things are working really well,” says Rennick.
Taking on the reins from Corral’s leadership, Rennick brings a host of industry experience. He has been in the financial services industry for over 32 years, more than half of which was spent on the sell side, working for prime brokers.
With his experience at Nomura, Barclays, Lehman Brothers, and Goldman Sachs — to name a few — Rennick will now take on J.P. Morgan’s Tri-party Agency Services globally. Prior to his current role, Rennick was responsible for the bank’s Agency Securities Finance business in the Americas and global responsibility for the relationship management team.
Rennick adds: “Representing the agent lenders, representing the beneficial owners, having sell side experience, and having a flagship triparty product allows us to really develop for the future.”
Reviewing his near term strategy for J.P Morgan’s Tri-party business, Rennick anticipates that the team will maintain its focus on developing solutions for clients. He will pay much attention to key deliverables within the core platform, as well as initiative like collateral expansion and collateral mobility. The sales and relationship management teams will continue to partner with clients to identify capital-efficient structures and deliver differentiated solutions and products.
He continues: “Our client segments are expanding. It's no longer just the traditional sell side clients; buy side clients also need to find liquidity, optimisation, and capital-efficient structures. There is significant potential for us to continue growing this product, and we will take the time to develop that vision in the near future.”
Singing his praises, Corral says Rennick is able to see the business from the investor's perspective, which is sometimes “the underappreciated part of triparty”. According to Corral, triparty agents usually have a heavy focus on the sell side, so to have someone that thoroughly understands and is coming from the buy side in triparty, in this respect, “is a tremendous addition” to the firm’s leadership with this product. Known to be coming from a role where he was “the biggest triparty investor” on the platform, Rennick’s experience as a client on the sell side “brings that dimension in as well”.
Reflecting on his own career, Corral indicates that this is an experience he also benefited from, with his time at both J.P. Morgan and Morgan Stanley. He continues: “Being able to come back from that and bring that experience into the product, which is exactly what George is bringing to the table here, is a turbo boost to the product. It will be exciting to see where George is going to take this business.”
Corral’s enthusiasm is reflected in the International Securities Lending Association’s (ISLA’s) excitement for Rennick’s transition into triparty — a critical and growing function of the lending ecosystem.
Rennick, who is currently on the ISLA Americas board of directors, says: “The industry working together on things like central clearing and shortened settlement cycles, with T+1 in the US, and now going global, has allowed us to be successful. Just being able to have this multifaceted perspective is welcomed by the association.”
Making a mark
From a mailroom supervisor to a global head position at J.P. Morgan’s New York headquarters, Corral’s 35-year career has succeeded through the global financial crisis, technology evolution, and industry innovation. Speaking to Securities Finance Times, Corral says: “It's been quite a run. I've enjoyed pretty much every minute of it.”
Discussing the key transformations in the collateral market, Corral says the proliferation of computers is an obvious example — as his time at Chemical Bank in 1989 proved with the use of a shared computer, an item that went amiss in his first role in the mailroom.
Following a number of mergers, Chemical Bank later became J.P. Morgan. During the early days of his career with the bank, Corral was previously responsible for global clearance and collateral management, as well as corporate trust finance.
He then took a 10-year-long break from the bank with a position at Morgan Stanley, where he was responsible for firm-wide collateral management and optimisation.
Looking back on his career, Corral recalls one of his greatest accomplishments to date, which took place during the aftermath of the global financial crisis in 2008, and involved his work in the reform of US triparty repo.
“The industry had to undergo a fundamental restructuring, up to and including Lehman. The two triparty banks in the US — J.P. Morgan and the Bank of New York Mellon — engaged in a process called ‘unwinding the entire book’,” Corral explains.
According to the Federal Reserve Bank of New York statistics, intraday credit extension peaked at US$2.7 trillion in February 2008. The two triparty banks were on the hook, intraday, for that amount of credit, Corral says. Typically, the triparty investors did not take the cash out of the banks, so it was more ‘credit on the books’ as opposed to an actual cash flow.
He notes: "That was a risk that the banks took, and it was not really recognised at the time. The whole industry, post the financial crisis, went through this reform of US triparty repo, and restructured how that worked. Now, it is similar to the way it has always worked internationally."
The dealers stayed continuously collateralised and this extinguished that intraday credit extension, he explains. That made the whole industry “fundamentally much safer” by de-risking that intraday credit extension. Corral believes this to be the biggest change, and one of the largest accomplishments he was a part of.
“Going through the financial crisis was such a learning opportunity that, I am sure we can all agree, had a profound impact on everyone,” he notes.
A strategic overview
Just like with playing chess, strategy is everything.
J.P. Morgan has seen clients take a much more sophisticated approach to triparty and recognising it as a key element of how they manage, not just their collateral, but how they manage their financial position.
The liquidity coverage ratio (LCR), net stable funding ratio (NSFR), along with the whole “alphabet soup” of all the regulations, have all come into play in how clients manage their triparty book, says Corral.
From a triparty bank's perspective, optimisation was “always about cheapest to deliver collateral”, making it the most financially attractive way of allocating collateral, he adds. But all of these other regulations have come into play, such as the Comprehensive Capital Analysis and Review (CCAR), risk-weighted assets (RWA), etc.
“All of that is now considered in how the banks manage their collateral, not just in triparty, but enterprise wide, and that level of sophistication has driven us to improve our product offering quite dramatically,” notes Corral. It has also resulted in larger firms, such as the global systemically important banks (G-SIBs), managing this comprehensive optimisation themselves.
They now manage optimisation in a much more holistic way, Corral explains, extending beyond just their triparty activities. These firms now instruct J.P. Morgan on how they want to manage the collateral within the bank’s programme. Our ability to respond quickly and adapt to these client instructions has been a significant change.
Previously, firms completely relied on the triparty bank to handle everything, but now J.P. Morgan operates in partnership, leading to “much better outcomes” for the banks.
While the sector has developed, there remain challenges for firms and their clients. For one, Rennick believes bank and broker-dealers, traditional sell side clients, are trying to solve universal needs, but not always in consistent ways.
He continues: “As a triparty agent, you have to be flexible to accommodate different models, different needs solving for different constraints. Flexibility creates contention, capacity constraints, and has costs and resource needs. Trying to address that, and making sure that you have the flagship product, is certainly a challenge, but also an opportunity.”
J.P. Morgan is trying to blend together what triparty offers with what the bilateral market already does, Corral interjects. For him, triparty is great at eligibility, optimisation, independent pricing — tasks that individuals typically manage on their own in a bilateral trade. In the CCP space, J.P. Morgan has created the ability to manage collateral on the triparty engine, but then delivering that collateral bilaterally out to the market — providing “the best of both worlds”.
By doing this, the firm aims to provide efficiency and optimisation through triparty, but also to break free from some of the limitations that triparty, as a closed ecosystem, has. J.P. Morgan has now deployed this tool and is already live and using this model in the CCP space — as well as with the segregation of initial margin (IM), in the Uncleared Margin Rules (UMR).
Corral adds: “Due to the affiliate rule, we cannot hold certain collateral ourselves if it is related to our trading activities. Therefore, we manage that collateral in triparty, but deliver it bilaterally to an independent third-party custodian.
“All of our clients would likely prefer to handle everything through triparty, but certain limitations prevent this. Some tasks don't work as well within the triparty framework, or the counterparties they are dealing with may not want to participate in triparty.”
For J.P. Morgan, managing collateral behind the scenes in triparty and delivering it bilaterally has unlimited capabilities. There is still as much collateral in the bilateral world as there is in the triparty world, Corral pinpoints. Triparty currently handles around US$9 trillion, and there is at least that much, if not more, still managed bilaterally, the firm confirms.
“There is an opportunity for a significant portion of it to go to triparty, by doing this merger of bilateral and triparty,” he highlights. “So it is more of an opportunity than a challenge, and it should be a really exciting development for triparty.”
Reviewing the current state of the collateral market and the use of triparty, Corral also evaluates where the future lies for these two sectors. Being in the digital age, where the securities finance industry is taking great interest in digital assets, blockchain and distributed ledger technology (DLT), it comes as no surprise that this modern technology is shaping the future.
Corral asserts that where blockchain and DLT is heading, is still in the early stages. “The concept of triparty, which involves locking up an asset to release its value, translates to the digital space,” he adds. “The goal is to eliminate the need for moving assets around the market, thereby reducing settlement risk and friction, while unlocking the value of those assets. Everyone is striving for this.”
By combining triparty with the emerging capabilities of digital technology, Corral believes the firm can achieve this on a larger scale, akin to the concept of a collateral superhighway.
His key recommendation for the market is to leave assets where they natively live — whether that is treasuries in the US or Japanese government bonds (JGBs) in Japan. He insists that the industry should not try to move these assets, but instead lock them up where they are, and then represent that value, whether that is through triparty or on a DLT.
“I am not sure how that is all going to develop, but that notion of the safety and the good control location of a product like triparty, and then allowing the value to go wherever it needs to go, whether that is through a CCP or a repo trade, stock loan, wherever that value is needed,” Corral comments.
He concludes: “Mobilise the value while you immobilise the assets. Triparty does a lot of that already, but I can really see the combination of triparty and digital taking it to a level that it has never been before.”
Looking ahead
After predicting the future path for the triparty sector, reminiscing about the early days and achievements in their careers, Corral and Rennick use their years of experience to provide advice for newcomers entering this space.
For Rennick, he recalls how he sat at Lehman the day it went bankrupt during the financial crisis, in the prime brokerage business, a core part of the firm’s funding. A number of lessons have been learned from this event. Liquidity crunches, credit deterioration, crisis events, market volatility, all happen from time to time, this is an apprenticeship type of industry, he advises.
Because of this, Rennick highlights that these are the times where people should want to be in the office, come to work, pay attention, and watch what everybody is doing.
“Crisis management, leadership — that comes with experience,” he states. “You cannot learn that any other way and those experiences allow you to expand your career, your understanding of risk management and discipline and form resilient products and services.”
He insists that, on a day-to-day basis, it is important to build relationships, build a network of people that you can bounce ideas off, and talk about your environment and what is going on. That is “tremendously helpful” in building your career, he adds.
“Ed and I have been doing this for years. We are still learning every day, and acknowledging that there is still more to learn, it is also the exciting part of this role.”
From Corral’s perspective, he believes there is “still so much opportunity” in this space for newcomers. J.P. Morgan represents every type of job in financial services, he promises. He continues: “There is always an opportunity to move on to the next challenge and explore new opportunities. I would love to see my kids and the young people we work with today get more involved, take bigger roles, and expand their remit. I think it is just a tremendously exciting space, and I would encourage anybody to get into it.”
Closing the page on a three-decade-long career, Corral will still look to keep active in some way, shape or form in the industry, but is also looking forward to some well deserved time off.
In his final thoughts, Corral says: “I have a ski house, I have let my skiing abilities deteriorate for quite some time, so hopefully I can pick that up again. I have four children, three of whom are married. I have a grandson, so I have definitely been enjoying spending time with him and look forward to doing a lot more with him.”
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Image: Ed Corral and George Rennick 
