The global financial industry is in the midst of a period of unprecedented change, as it navigates the aftershocks of the 2007-2008 banking crisis. Adapting to these changes is the biggest challenge that financial institutions have faced for a long time.

Counterparty credit risk, asset safety and transparency rose to the fore following the financial collapse of many large institutions.

 

Lessons from the crisis have culminated in regulatory changes to ensure greater financial stability, as well as the mitigation of  systemic risk through the collateralisation of financial exposures and debt obligations. These changes will result in greater pressure on the financial markets to collateralise exposures (securities lending, interbank repurchase agreements, over-the-counter derivatives, collateralised loans) with High-Quality Liquid Assets (HQLA).

 

Market players need to be able to effectively mobilise these assets to the right exposure, at the right place and time. Strate will be the country’s first independent tri-party collateral agent. Strate’s Collateral Management Services can assist to ensure the efficient and seamless management of the collateral process through automation of the collateral mobilisation and return function, while also mitigating the operational risk and effort around the arduous administrative tasks required to select, book, reconcile, substitute and withdraw collateral. This includes the mobilisation of cash and non-cash collateral (such as bonds, equities and money markets) through the:

  • Automatic selection (cheapest to deliver) of collateral, substitutions, collateral calls and withdrawals;
  • Integration with existing bilateral collateral management software;
  • Detailed and customised eligibility criteria (inclusive of concentration risk) between counterparts;
  • Continuous monitoring of the value of the collateral received for the duration of the exposure;
  • Perfecting of pledged securities;
  • Full tracking of reused collateral received through a cession;
  • Full management of corporate actions and capital events; and
  • Market-wide collateral optimisation.

 

Strate also ensures appropriate asset segregation and safety, settlement and reporting. For more information on this service, please contact collateral@strate.co.za.

 

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