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Collateral optimisation and transformation

By 15 Nov, 2012June 18th, 2018News

Futures & Options World

Galen Stops’ buy-side guide to client clearing discusses the challenges and implementation of the client clearing mandates. He examines the optimisation and transformation process, looking at its costs and mechanics.

With regulatory changes to collateral requirements, Jamie Lake, Principle Consultant, GreySpark, warns that offering collateral transformation services could potentially cause liquidity issues for the banks. Lake highlights how banks won’t be able to borrow indefinitely as they will end up with a balance sheet of illiquid products.

Similarly, looking at the pension funds’ struggle in the low interest rate environment, Lake comments that there is increasing pressure on them to generate income elsewhere.

In conclusion he warns that the whole issue of liquidity transformation is going to push the risk back towards the banks.

The article continues to look at further issues in the collateral management process which pose challenges for the buyside.