CM18: The industry isn't doing enough to investigate disputes on collateral calls
12 October 2018 Amsterdam
Image: Shutterstock
“We’re not exactly hiding away, but we aren’t doing enough to investigate disputes on collateral calls”, according to panellist said at this year’s Annual Collateral Management Forum, when asked what were his day to day challenges of collateral management.
The panellist, head of collateral management at a Nordic-based asset management firm, said in terms of these disputes: “I have to be honest here, across the board I think we are talking to other members of the industry, but more collaboration is needed.”
He said that one particular problem was that collateral portfolios are not being aligned enough.
The moderator also asked the panel how they calculated initial margin calls, to which the head of collateral said he used triOptima triResolve to enhance delivery, though said he did not receive calculations from all of them, as not all calculations were done in-house at his firm.
However, he said: “We fully trust our outsource company to do so.”
When the conversation moved on to consideration of certain security portfolios, one panellist said he used government bonds to a large extent, but indicated there is a question of how liquid these can be, and indicated regulation is trying to enhance this.
He stated that regardless of your level of compliance, “you should always have to ensure you know who knows what, there needs to be clarity on ownership”.
He also affirmed that another ruling factor is to consider the legal environment, especially post-crisis.
The panel then gave their views on how important it was for their firm to keep vendor margin calculations in-house, and if they would consider using a third party.
One panellist said: “From a buy-side perspective, there’s no reason for keeping calculations in-house. If we get rid of portfolio disputes and have complete collateral efficiency, you shouldn’t have to look at your collateral on a daily basis.”
He added: “Looking further into the future, it could be developed as a cloud-type system, one central cloud system could be extremely beneficial. If I have to provide extra information I will, it's’ easy to talk to counterparties about it.”
Another panellist agreed that a central utility would greatly help, but he said he wouldn’t hold his breath waiting for that to happen, because “in some places, the industry still uses faxes” for collateral purposes.
However, he did affirm he has recently seen a lot of initiatives in Europe and globally to automate more, and surmised “regulatory pressures from regulators will lead us in a direction more toward that”.
The panellist, head of collateral management at a Nordic-based asset management firm, said in terms of these disputes: “I have to be honest here, across the board I think we are talking to other members of the industry, but more collaboration is needed.”
He said that one particular problem was that collateral portfolios are not being aligned enough.
The moderator also asked the panel how they calculated initial margin calls, to which the head of collateral said he used triOptima triResolve to enhance delivery, though said he did not receive calculations from all of them, as not all calculations were done in-house at his firm.
However, he said: “We fully trust our outsource company to do so.”
When the conversation moved on to consideration of certain security portfolios, one panellist said he used government bonds to a large extent, but indicated there is a question of how liquid these can be, and indicated regulation is trying to enhance this.
He stated that regardless of your level of compliance, “you should always have to ensure you know who knows what, there needs to be clarity on ownership”.
He also affirmed that another ruling factor is to consider the legal environment, especially post-crisis.
The panel then gave their views on how important it was for their firm to keep vendor margin calculations in-house, and if they would consider using a third party.
One panellist said: “From a buy-side perspective, there’s no reason for keeping calculations in-house. If we get rid of portfolio disputes and have complete collateral efficiency, you shouldn’t have to look at your collateral on a daily basis.”
He added: “Looking further into the future, it could be developed as a cloud-type system, one central cloud system could be extremely beneficial. If I have to provide extra information I will, it's’ easy to talk to counterparties about it.”
Another panellist agreed that a central utility would greatly help, but he said he wouldn’t hold his breath waiting for that to happen, because “in some places, the industry still uses faxes” for collateral purposes.
However, he did affirm he has recently seen a lot of initiatives in Europe and globally to automate more, and surmised “regulatory pressures from regulators will lead us in a direction more toward that”.
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