Marcel Naas, Global Head of Funding & Financing (GFF)
Follow Marcel Naas on LinkedIn.
In an ever changing landscape, market participants have had to increase their intellectual capacity in running existing operating models in today’s regulatory and capital intensive environment. Realigning critical functionality under a core umbrella has increasingly become the new standard and forward thinking organisations have restructured accordingly.
Central banks liquidity injections
Today, collateral is affected by a range of factors, including the central bank’s asset purchasing programme (APP) and negative interest rates. The ECB has announced its expanded APP to address the risks of a too prolonged period of low inflation. Purchases have now been reduced to a new monthly pace of EUR 30 bn until the end of September 2018.
Increased demand for eligible collateral
Centralised clearing of swaps has increased demand for eligible collateral, while the Liquidity Coverage and Net Stable Funding ratios have made the quality and maturity of securities on the balance sheet more important.
Regulatory pressure to hold customer and proprietary assets in segregated, rather than omnibus, accounts has further contributed to the complexity of mobilising and using collateral. This is simply because it is more difficult to manage assets held in multiple accounts in multiple locations on behalf of multiple customers than it is to manage a single pool of collateral.
In this environment, efficient mobilisation of collateral is an essential part of effective capital and liquidity management. The incentive to optimise collateral will only intensify as central banks withdraw from APP and interest rates start to rise, because the scarcity of eligible collateral is bound to increase as these things happen.
Moving towards more efficient operational practices
Our role as a leading funding and financing provider is to create solutions and facilitate firms’ efforts to move towards more efficient market and operational practices, optimising collateral with CCP and non-CCP collateral trading, facilitating mobilisation and allocation of collateral across locations and product areas.
At GFF, we are in close collaboration with customers to clearly understand how they want us to develop our global infrastructure and product solutions in order to optimise these efficiencies – where we can deliver netting efficiencies for margins and transactions, assisting effective collateral mobilisation and allocation cross-border and delivering this through an automated process.