Asset managers and financial institutions will have to make bold decisions in order to adapt their collateral and liquidity management functions to global investment activities, according to Clement Phelipeau, Societe Generale Securities Services product manager for derivatives and collateral management services.
As the landscape of financial markets shifts, market participants are being prompted to adapt their strategies in order to support growth, enhancing processing capabilities to cope with regulatory requirements and to manage associated costs.
Phelipeau said: “Efficient collateral allocation will give asset managers and financial institutions significant competitive gains.”
He cited the European Market Infrastructure Regulation (EMIR), the Dodd-Frank Act, the Markets in Financial Instruments Directive (MiFID) II and Basel III’s capital requirements and margining requirements of over-the-counter derivatives.
Transactions will need to be increasingly collateralised in order to mitigate credit risk, and it will be important for firms to implement new collateral management strategies, maximising the use of eligible assets.
