Collateral smarts lacking, finds Clearstream
27 January 2014 Luxembourg
Image: Shutterstock
Financial institutions need to smarten up when it comes to their collateral management operations, according to Clearstream’s Stefan Lepp.
The Clearstream-hosted 18th Global Securities Finance Summit in Luxembourg surveyed approximately 850 attendees on a range of topics in the hope of clarifying key issues affecting the market.
Sourcing the most appropriate collateral to cover global exposures is increasingly a top priority for financial institutions, yet most still have “much work to undertake” to establish a clear approach to their collateral management needs, found Cleastream.
Some 95 percent of the attendees, who represent pan-regional institutions, infrastructures, investment banks, universal banks and central banks from across the globe, expressed that “sourcing the most appropriate collateral to meet new industry practices has risen up their institution’s agenda in the past 12 months”.
At the same time, more than 61 percent of attendees agreed that their financial institutions still had some way to go to establish a clear strategy, approach and measures to address future collateral management needs. Only 13 percent had already achieved readiness.
In light of upcoming regulatory requirements for financing to be more collateralised, 85 percent of attendees strongly agreed that triparty repo would become increasingly attractive to corporates as a replacement for cash deposits.
Commenting, Stefan Lepp, who is head of global securities financing and an executive board member at Clearstream, said that financial institutions know that they need to “get smarter” about their collateral management operations.
“Yet while we know that collateral is in theory available, much of it remains fragmented and difficult to unlock and mobilise, which comes at a high cost. At the same time, creating new systemic risk by pooling collateral in a single place must be avoided.”
The Clearstream-hosted 18th Global Securities Finance Summit in Luxembourg surveyed approximately 850 attendees on a range of topics in the hope of clarifying key issues affecting the market.
Sourcing the most appropriate collateral to cover global exposures is increasingly a top priority for financial institutions, yet most still have “much work to undertake” to establish a clear approach to their collateral management needs, found Cleastream.
Some 95 percent of the attendees, who represent pan-regional institutions, infrastructures, investment banks, universal banks and central banks from across the globe, expressed that “sourcing the most appropriate collateral to meet new industry practices has risen up their institution’s agenda in the past 12 months”.
At the same time, more than 61 percent of attendees agreed that their financial institutions still had some way to go to establish a clear strategy, approach and measures to address future collateral management needs. Only 13 percent had already achieved readiness.
In light of upcoming regulatory requirements for financing to be more collateralised, 85 percent of attendees strongly agreed that triparty repo would become increasingly attractive to corporates as a replacement for cash deposits.
Commenting, Stefan Lepp, who is head of global securities financing and an executive board member at Clearstream, said that financial institutions know that they need to “get smarter” about their collateral management operations.
“Yet while we know that collateral is in theory available, much of it remains fragmented and difficult to unlock and mobilise, which comes at a high cost. At the same time, creating new systemic risk by pooling collateral in a single place must be avoided.”
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