Browsing articles in "Modern Collateral Management"

Modern Collateral Management

The creation and optimal steering of collateral is key for Financial institutions.

Collateral is inter alia needed

  • to get financing from the ECB through repo transactions
  • to get funding for OTC derivatives, especially for FX swaps
  • as a pledge to central counterparties, for margining and clearing (EMIR)
    and tri-party-repo business
  • for secured funding
  • as HQLA (High Quality Liquid Assets) to improve the LCR (Basel III)
  • for direct refinancing by means of the ECB ABSPP-program (Funding)

The challenging market environment paralleled by rating downgrades led to a growth in demand for appropiate collateral. We can summarise that expensive and sparse collateral leads to business restrictions for Financial institutions and that the availability of suitable collateral is one of the key drivers to succeed in the financial markets at least in the near future.

A modern collateral managment system is characterisized by

  • an active role taking into account pricing aspects and an optimal allocation subject to eligibility criteria
  • a close link to the cash flow steering department of the Financial institution
  • the ability to map collateral generating transactions
  • the ability to measure the effects of collateral generating transactions
  • a transfer pricing system (STP)