The emphasis on risk mitigation has increased significantly for all involved in the financial markets since new regulations such as Basel III, Solvency II and Regulation 28 of the Pension Funds Act were introduced. Local and international institutions have to reassess the use of collateral to mitigate credit and settlement risk in order to place greater emphasis on the retention of liquid assets on the balance sheet of South African financial institutions and lead to more use of securities as collateral.
Markets will need to start adopting a single, centralised, market-wide system, as the current market practice of bilateral and predominately cash-based collateral agreements exposes many parties to counterparty risk (in the case of default) and settlement risk (in the instance where margin calls cannot be met).
Strate’s Tri-Party Collateral Management Services
By developing such a system, financial institutions will also avoid the challenging and expensive complexities they could face if they were to develop and maintain a proprietary collateral management system instead.
Strate has pioneered an initiative aimed at providing a state-of-the-art, proven Tri-Party Collateral Management service to the domestic market. It will utilise collateral management services developed by Clearstream for the automatic allocation, substitution and optimisation of local collateral.
Collateral Management Seminar
We saw the need to organise a Collateral Management Seminar that will revolve around the impact of these changes and explain why the market-wide system would complement the existing collateral management functions of banks, pension funds, securities lenders and borrowers, asset managers and clearing houses in a collaborative manner.
The seminar, which will be held on 20 November at Glenhove Conference Centre, will also focus on future developments and will include a number of high-profile speakers, such as: Marilyn Ramplin, CEO of The Hedge Fund Academy; Michael Denenga from MD Attorneys; Jan Kotze from ABSA Capital as well as Ashley Sadie from Deloitte Consulting.