Poll Reveals Level of Industry Readiness For Solving the Collateral Conundrum

More than 61% of delegates who were polled at an industry event say their financial institutions have some way to go to establish a clear strategy to address future collateral management needs. According to the poll, only 13% have achieved readiness.
By Janet Du Chenne(59204)
More than 61% of delegates who were polled at an industry event say their financial institutions have some way to go to establish a clear strategy to address future collateral management needs. According to the poll, only 13% have achieved readiness.

The anonymous poll took place at Clearstream’s 18th Global Securities Financing Summit, which brought together more than 850 delegates, in Luxembourg last week.

Some 95% of the delegates – 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.

Additionally, in light of upcoming regulatory requirements worldwide for financing to be more collateralized, 85% of the delegates strongly agreed that tri-party repos would become increasingly attractive to corporates as a replacement to cash deposits, whereby the tri-party repo option offers a more securitized alternative. A tri-party repo is a transaction for which collateral selection and substitution, valuation, settlement and custody during the life of the repo transaction is outsourced by the two trading parties to a third-party agent.

Commenting on the poll results, Stefan Lepp, head of Global Securities Financing at Clearstream, said: “The financial community knows that it needs to get smarter about its collateral management operations to help de-risk the markets and comply with regulatory requirements. Yet while we know that collateral is in theory available, much of it remains fragmented and difficult to unlock and mobilize, 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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