Next Step for Collateral Management: Enterprise-wide View
September 28, 2010
Creating a centralized enterprise-wide view is one of the most important goals of fund managers, broker-dealers and banks when it comes to collateral management, according to a survey released on Tuesday by SunGard Data Systems and Finadium.
Sixty-three percent of the 122 U.S. fund managers, broker-dealers and banks interviewed by the two firms said that a single view of all their collateral was critical to measuring counterparty risk and optimizing the use of collateral. That means using the least amount of collateral for each transaction.
Financial firms typically manage collateral on a product by product basis through different applications and business units. Having a firm-wide view of collateral allows companies to understand just how much collateral they are either owed or owe to a single counterparty for each type of collateralized transaction. Securities lending deals, repurchase agreements and over-the-counter transactions are most often collateralized with either cash, securities or a combination of the two.
Over seventy percent of the survey's respondents said that they would want to consolidate their views of collateral requirements for securities lending transactions and repurchase agreements; both are typically classified as securities financing deals. About 55 percent of the respondents also said they wanted to add collateral management functions for over-the-counter derivatives to the mix.
While having an enterprise-wide view of collateral is ideal, achieving it isn't easy. About fifty seven percent of the respondents said that legal and organizational issues were the biggest constraints while 53 percent said that technology was an obstacle.
Based in New York, SunGard offers collateral management software for securities lending, repurchase and over-the-counter derivatives transactions. Finadium, based in Concord, Ma. is best known for its research in the asset servicing industry including securities finance, prime brokerage and collateral management functions.
