BNP Paribas Securities Services has launched a new service to help asset owners measure and monitor the counterparty and liquidity risk arising from their derivatives exposure and anticipate their long-term collateral requirements.
The new predictive collateral coverage reporting solution is already being used by AIA Group, a long-term risk and analytics client of BNP Paribas Securities Services in Asia.
According to BNP Paribas, as regulations have generalised the use of collateral to mitigate counterparty risk and require market participants to meet collateral calls over the full lifetime of an over-the-counter (OTC) derivative, asset owners are exposed to increased liquidity risk.
Mark Konyn, group chief investment officer at AIA Group, said: “Managing derivatives portfolios in different jurisdictions across Asia Pacific requires robust risk management and governance processes. Tools that support the asset owner calibrate collateral requirements are critical. We are very pleased with the solution developed by BNP Paribas, which has enabled AIA to manage the liquidity risk and collateral requirements.”
Philippe Tassin, head of asset managers and asset owners, Asia Pacific at BNP Paribas Securities Services, added: “For our asset owner clients, predicting their collateral needs, and optimising increasingly scarce collateral resources, have become vital to the success of their investment and risk management practices. They have to ensure they can satisfy every collateral call over the lifetime of each OTC derivative in their books.”
