Euroclear Publishes Collateral Management Survey Report
Produced by Aite Group, “Collateral Management in Europe: Searching for Central Intelligence” a timely analysis of the sector
Report highlights the realities facing treasurers and collateral managers in firms active in Europe
Brussels, 19 May 2015 – Euroclear today published a report entitled “Collateral Management in Europe: Searching for Central Intelligence” at its 14th annual Collateral Conference in Brussels, Belgium. 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.
Jo Van de Velde, Managing Director and Head of Product Management at Euroclear, said: “This timely research underscores our belief that market dynamics and regulatory changes are propelling collateral management issues to the forefront of both financial and non-financial firms, in a major way. Many industry experts argue that collateral has become a new currency, as firms look to shore-up credit exposures from a variety of different activities while grappling with increased balance sheet pressures. Remaining competitive in today’s markets involves facilitating the use of expert, open architecture providers; ones with the critical mass of asset pools and counterparties, as well as with a global reach.”
Virginie O’Shea, Senior Analyst at Aite Group, commented: “Regulatory reform is a driving force behind firms’ current re-evaluation of their collateral management capabilities. EMIR is heightening the need for a more proactive approach to collateral, on a more frequent basis. Assets must be quickly identified and seamlessly transported to where they are required. This is a significant challenge, given the internal and external inefficiencies that must be overcome, and something that they are unlikely to be able to tackle on their own. One thing is sure, firms are looking to gain an aggregate view of their collateral inventory in order to set the groundwork for optimization. It is early days for some firms in this regard, but what is certain is that the front office is taking a much more active role overall.”
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About Aite Group
Aite Group is an independent research and advisory firm focused on business, technology, and regulatory issues and their impact on the financial services industry. With expertise in banking, payments, securities & investments, and insurance, Aite Group’s analysts deliver comprehensive, actionable advice to key market participants in financial services.
Headquartered in Boston with a presence in Chicago, New York, San Francisco, London, and Milan, Aite Group works with its clients as a partner, advisor, and catalyst, challenging their basic assumptions and ensuring they remain at the forefront of industry trends.
Euroclear is one of the world’s largest providers of domestic and cross-border settlement and related services for bond, equity, ETF and mutual fund transactions with offices in 15 countries across the globe and links to 46 international markets.
Euroclear is a proven, resilient capital market infrastructure committed to delivering risk-mitigation, automation and efficiency at scale for its global client franchise which includes over 100 central banks and supranationals.
The Euroclear group includes Euroclear Bank - which is rated AA+ by Fitch Ratings and AA by Standard & Poor’s - as well as Euroclear Belgium, Euroclear Finland, Euroclear France, Euroclear Nederland, Euroclear Sweden and Euroclear UK & Ireland. The group settles the equivalent of $682 trillion(€634 trillion) in securities transactions annually representing 182 million domestic and cross-border transactions. The group holds $900 billion (€833 billion) in average daily collateral outstandings, and over $28 trillion (€26 trillion) in assets for clients.
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