The implementation of global capital market regulations, particularly new rules mandating the central clearing of OTC derivatives, is driving increasing demand for high-grade collateral. As a result, several banks shifted their collateral operations from the back-office to the front-office to ensure a high degree of control over daily collateral management processes. However, many banks realise that it takes more than just a focus on front-office activities and practices to ensure the efficient usage of collateral in a manner that remains beneficial to the bottom line.
The theoretical objective of collateral optimisation practices is straightforward: to find ways to view collateral holdings and obligations in a central location, allowing banks to utilise those holdings as efficiently as possible to fulfil obligations. Put into practice, these processes are complex. Many banks are identifying hurdles related to finding and integrating additional solutions into their existing technology stack. The banks are creating and implementing new operational processes and working to find the appropriate budget or human capital, all of which limits banks from optimising collateral management practices.
GreySpark Partners works with banks to develop enterprise-level changes for collateral operations. For example, this report describes how banks are struggling to support increased pressures on their collateral processes by adding additional headcount. As such, the report analyses the collateral operations of global banks and recommends ways to streamline and optimise collateral flows. The report also discusses the need for banks to take a tactical versus a strategic view of the bank’s overall collateral optimisation strategy.
