SIX releases collateral management study
17 September 2013 London
Image: Shutterstock
SIX Securities Services has released a new study revealing current attitudes to collateral management.
Collateral Management: How Collateral Values Can Prevent The Next Crisis’ highlights the views of senior figures responsible for collateral management as 60 leading financial firms in the UK, France and Germany.
According to the study 35 percent of respondents think that it is acceptable for collateral to be low quality, complex and opaque, so long as it is cheap.
Three-quarters of financial institutions also believe that collateral management has become, or is at risk of becoming, a commodity.
The study also highlights that 53 percent of firms see the main benefit of using an end-to-end collateral management provider is that they make internal operations simpler. Only 18 percent see the main benefit of collateral management providers as lowering total cost.
Thirty-eight percent of respondents believe that the most important requirement of a collateral management system is that it covers central counterparty acceptance, compared with just 2 percent who say cost.
Robert Almanas, managing director for international services at SIX Securities Services, said: “Collateral is now of critical importance to financial institutions. The collateral lockdown brought about by Dodd-Frank, EMIR and Basel III means collateral management—for so long consigned to the back office—is now an issue of board-level concern. Good collateral management is not just about keeping an institution’s operations as efficient as possible but ensuring that they are also simpler and more secure than in the past.”
“When deciding upon a collateral management provider, firms should look to a wide range of variables including knowledge of local markets, real-time counterparty risk exposure, quality of the on-boarding process and multi-geography, multi-currency, multi-asset class functionality. Tri-party collateral management systems are also becoming increasingly coveted for their ability to safely ring-fence an institution’s assets.”
Collateral Management: How Collateral Values Can Prevent The Next Crisis’ highlights the views of senior figures responsible for collateral management as 60 leading financial firms in the UK, France and Germany.
According to the study 35 percent of respondents think that it is acceptable for collateral to be low quality, complex and opaque, so long as it is cheap.
Three-quarters of financial institutions also believe that collateral management has become, or is at risk of becoming, a commodity.
The study also highlights that 53 percent of firms see the main benefit of using an end-to-end collateral management provider is that they make internal operations simpler. Only 18 percent see the main benefit of collateral management providers as lowering total cost.
Thirty-eight percent of respondents believe that the most important requirement of a collateral management system is that it covers central counterparty acceptance, compared with just 2 percent who say cost.
Robert Almanas, managing director for international services at SIX Securities Services, said: “Collateral is now of critical importance to financial institutions. The collateral lockdown brought about by Dodd-Frank, EMIR and Basel III means collateral management—for so long consigned to the back office—is now an issue of board-level concern. Good collateral management is not just about keeping an institution’s operations as efficient as possible but ensuring that they are also simpler and more secure than in the past.”
“When deciding upon a collateral management provider, firms should look to a wide range of variables including knowledge of local markets, real-time counterparty risk exposure, quality of the on-boarding process and multi-geography, multi-currency, multi-asset class functionality. Tri-party collateral management systems are also becoming increasingly coveted for their ability to safely ring-fence an institution’s assets.”
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