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Collateral Management Dynamics in Europe: Searching for Central Intelligence - a timely analysis of the sector

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Derivatives Collateral Management: Entering the Industrial Age?

Second report produced by Aite Group available now!

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20150514_Euroclear Collateral_Full infographic

Produced by Aite Group, the report highlights the current challenges and opportunities facing treasurers and collateral managers in firms active across Europe’s capital markets.

Based on interviews with respondents from 20 firms, comprising brokers, banks, asset managers, pension funds and corporates, the research showcases several major areas for industry action as the markets continue to grapple with the impact of quantitative easing, among other things, on the available supply of high-quality liquid assets. Key findings include:

  • Stronger and more numerous relationships among triparty repo participants will be key in the coming years, with related activity between European firms and non-European counterparties doubling from 17.5% in 2001 to 34% in December 2014. The report also finds that 70% of respondents consider collateral transformation (where one type of collateral is substituted for another via a series of repo or securities lending arrangements) to be high on their agenda.
  • The challenge of collateral mobility was reported by the greatest number of respondents, at 35%, along with pricing assets. Accordingly, firms are looking to tap global pools to manage their immediate liquidity challenges, and thereby increase intra-day credit needs. Having a single global view of their inventory remains the ‘Holy Grail’ for marketplace participants.
  • The need for standards is ever-pressing for a quarter of respondents, and this is driving the focus on collateral resourcing and optimisation – notably 30% of respondents lack an optimisation strategy. Moreover, with over-the-counter derivatives moving into a cleared environment, the increase in daily and intraday margin calls will demand even more robust collateral management strategies among participants.
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