Strate-Clearstream Launch Collateral Management Service for SA Firms

South African CSD Strate has launched its collateral management service via a partnership with Clearstream.

The centralized service will be provided to financial institutions, including banks, fund managers and the Johannesburg Stock Exchange (JSE) to more efficiently manage collateral and to mitigate operational and credit risk within the South African market.

Together, Strate and Clearstream are preparing local market participants for the introduction of new international regulations, such as Basel III and Solvency II, which will place pressure on the availability and funding costs associated with holding high-quality liquid assets (HQLA). In addition, the requirement to hold margin which may be expanded from cash to the include HQLA – to be placed with the CCPs for OTC derivatives trades. The requirement to collateralize non-cleared OTC
derivatives is also set to affect the South African market as financial institutions will need to hold greater regulatory and solvency capital with increased requirements for unencumbered HQLA.

Strate’s Collateral Management Service, which is being provided by Clearstream on an outsourced white-labeled basis, will optimize the use of collateral by local financial institutions without moving their assets overseas. Clearstream has similar partnerships with CSDs in Brazil, Australia and Canada.

Strate’s strategic projects director, Anthony van Eden, says that there has been an overwhelming interest from the local market for the use of the service. “We are also in discussion with a number of other financial institutions, in addition to the ones named above, who are seeing the benefit of this industry-wide initiative and exploring the use of the service,” he adds.