Morgan Stanley talk tri-party at Capitol Hill
07 August 2012 Washington D.C.
Image: Shutterstock
A committee on securities, insurance and investment met to conduct a hearing entitled “The Tri-Party Repo Market: Remaining Challenges” in Capitol Hill, Washington D.C.
Thomas Wipf, managing director at Morgan Stanley responsible for Secured Funding, Securities Lending and Counterparty Portfolio Management, discussed the markets for secured funding.
“As an active member participant in the work of the Tri-Party Reform Committee, Morgan Stanley remains committed to accomplishing the goals laid out by the Committee within a timeline that is ambitious and acceptable to all stakeholders. Morgan Stanley agrees with the Financial Stability Oversight Council that more needs to be done and the delay in soundly eliminating intra-day credit risks is "unacceptable".
He added that secured funding is an important funding source, and a foundational component of Morgan Stanley’s centralised liability management strategy.
“We are committed to and have taken significant steps to put all the recommendations into practice at our firm. We have heard clearly from the secured funding investor community that the collateral management services provided by the clearing banks are an important element of their collateral valuation and risk management process.
He also stated that it is clear that responsibility cannot be solely assigned to the two clearing banks.
“We in the bank dealer community have to take the immediate and incremental steps available through our liability management practices to become a bigger part of the solution. There is no single operational solution or system development that can solve this issue completely.
"What is required is collaboration between the bank dealers and the two clearing banks to provide a set of strategic steps to begin a tactical but meaningful reduction of intraday credit extension in parallel to building operational and system enhancements. We believe that the status quo is unacceptable and by beginning this reduction through prudent liability management, we can reduce risk during the proposed build out by the clearing banks.”
Thomas Wipf, managing director at Morgan Stanley responsible for Secured Funding, Securities Lending and Counterparty Portfolio Management, discussed the markets for secured funding.
“As an active member participant in the work of the Tri-Party Reform Committee, Morgan Stanley remains committed to accomplishing the goals laid out by the Committee within a timeline that is ambitious and acceptable to all stakeholders. Morgan Stanley agrees with the Financial Stability Oversight Council that more needs to be done and the delay in soundly eliminating intra-day credit risks is "unacceptable".
He added that secured funding is an important funding source, and a foundational component of Morgan Stanley’s centralised liability management strategy.
“We are committed to and have taken significant steps to put all the recommendations into practice at our firm. We have heard clearly from the secured funding investor community that the collateral management services provided by the clearing banks are an important element of their collateral valuation and risk management process.
He also stated that it is clear that responsibility cannot be solely assigned to the two clearing banks.
“We in the bank dealer community have to take the immediate and incremental steps available through our liability management practices to become a bigger part of the solution. There is no single operational solution or system development that can solve this issue completely.
"What is required is collaboration between the bank dealers and the two clearing banks to provide a set of strategic steps to begin a tactical but meaningful reduction of intraday credit extension in parallel to building operational and system enhancements. We believe that the status quo is unacceptable and by beginning this reduction through prudent liability management, we can reduce risk during the proposed build out by the clearing banks.”
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