Two of South Africa’s large financial institutions, Standard Bank South Africa Ltd (SBSA) and FirstRand Bank (FRB), have created a significant milestone for South Africa’s financial markets, entering into the first secured interbank collateralised lending transaction through the country’s only Tri-Party Collateral Management Services Provider, Strate. The transaction was processed on 9 December 2015.


Strate is licensed as South Africa’s Central Securities Depository (CSD) and it has provided post-trade products and services to the financial markets for South Africa since 1998. Its collateral management services were launched in 2014 to assist the financial markets in efficiently managing their collateral by providing a cost-effective automated solution.


Paul Burgoyne, Head: SBSA Treasury and Money Markets, says Standard Bank is pleased with the introduction of tri-party repo technology to the South African market. “These developments will reduce risk in the local interbank markets, initially by making secured square-off options available to banks and should have a positive development on secured financing markets in South Africa”.


Muzi Mavuso, Head of Intraday Liquidity Management at FRB, adds, “This is a milestone for the interbank market in South Africa. We as FirstRand Bank are very excited and proud to be part of this history in the making. We would also like to congratulate Strate for successfully delivering the product to the market”.


According to the Head of Strate’s Collateral Management Services, Anthony van Eden, the efficient and automated services provide significant benefits to both the collateral givers and receivers as well as mitigating counterparty credit and operational risks.


“Strate’s Collateral Management Services provides banks with the opportunity to lend interbank on a collateralised basis in the daily ‘square-off window’ at the South African Reserve Bank. The service automatically selects ‘available for use’ securities (bonds, equities and money market securities) from the banks’ pools of available eligible securities based on predefined agreed collateral eligibility criteria of the counterparty banks, which are preloaded into the service. Securities placed as collateral can either be in the form of a pledge or under cession. The fact that the interbank overnight lending market can now be collateralised not only makes interbank overnight borrowing cheaper but also provides access to funds above banks unsecured credit limits and will widen and deepen liquidity pools in the South African Market.”


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