Collateral Management Conference

Right now collateral management has become an essential part of a financial institution's framework for risk and regulatory compliance. It is already a business practice in its own right and is recognized as one of the most important risk mitigating techniques in the credit risk area, and part of the latest Basel II guidelines.

More and more financial institutions, are focusing on the benefits of mitigating credit risk with counterparts through the regular giving and taking of collateral. Collateralisation is a credit enhancement technique and is a means of mitigating credit risk associated with privately negotiated derivatives transactions. In fact, many institutions will only deal with counterparts who can support complex collateralized arrangements and manage large and diverse trade portfolios.

There are way too many issues around collateral management to look deep into, but for our event we have decided to focus on operational issues and operational excellence.

Let us now look closely at the conference itself, since it has been very positively perceived by all participating industry leaders who met, oddly enough, in Amsterdam away from all the strictly financial locations.

The forum has been opened up by Michael Payne recognized expert in the field of collateral management, representing Citigroup. The presentation looked in detail at collateral evolution starting back in 1994 when the NY CSA was published by ISDA going all the way to the Collateral Framework group establishment in 2006 and US Sub-prime market in 2007. Emphasis was put on collateral drivers such as reducing credit risk, capital savings, increased competitiveness, improved market liquidity etc. The major trends in collateral management according to Michael are enterprise-wide collateral management, increase in the profile of trade reconciliation or increased usage of cash as collateral. This overview was an excellent keynote for the fruitful two day event.

Further on, we looked into operational requirements for effective collateral management, guided by Joe Martin from Deutsche Bank, another star name in the field of collateral management. The presentation covered all fundamentals, margin process, treasury aspects of collateral management tools and functionality resulting in next phase of collateral management that concluded into bilateral benefits of collateral and the flexibility to fit the counterparts. As absolute necessity is perceived the proactive reconciliations, reduction of disputes and improvement of in-house date quality.

Maurice Tamman – Goldman Sachs enriched the event with not only the presentation but with a very lively and rich discussion. Delegates were eager to learn about all the issues that covered practicalities of collateral management implementation, crucial operations to focus on and pitfalls to avoid and last but not least collateral management as a long term strategy adding value to the business.

Streamlining the collateral management processes was the focus of second largest financial institution in Scandinavia since 2000, Danske Bank presentation, delivered by Niels Martin Tholstrup Fjeldgaard. Briefly introducing the development of collateral management in their bank coming across the issue of cash as collateral vs. bonds as collateral he came to the most interesting part about the best practice in Danske Bank on how to achieve the most accurate daily monitoring of collateral positions and collateral workflow. Highly appreciated by all participants. Loud discussion was inspiration opened minds of collateral experts in the room and focused on the room for improvement.

The highest expectations were laid perhaps on acknowledged speaker from KBC – Dany Peeters, who certainly did prove his reputation of not only entertaining speaker. His KBC experience on best practice strategies in collateral management was a blockbuster for the audience. Concentrating on collateral management objectives as well as on how can collateral management add value to your business and touching improvements on portfolio reconciliation process. He finished the presentation with benefits of collateral management outsourcing.

Fernando Gonzalez from European Central Bank offered recent developments in the eurosystem collateral framework, later on the participants had the chance to hear about credit claims as eligible collateral which proved to be a very interesting topic.

TriOptima, as major solution provider could not miss on an event like ours was. Per Sjoberg spoke about pro – active portfolio reconciliations, a field where TriOptima has enormous amount of experience and knowledge.

First day was concluded by Credit Suisse’s Mark Rowlands and Geoff Robinson, two experts bringing in knowledge, experience, wit and charm at once which was very much appreciated by audience. They could not resist to some provocative statements – opening minds and offering different point of view. Moreover we had some very detailed mapping of vendor solutions and again a thriving discussion.

Second day was opened by Adam Brown from Royal Bank of Scotland. His presentation was touching on collateral management in OTC markets. A common agreement was reached – collateralized trading has many advantages. The ever-changing market place constantly forces expert to keep looking into practicalities around collateral management. Strong message from this presentation was that portfolio reconciliations need to be a key are of focus if wanting to create a controlled collateral function.

Marilyn Ramplin from JP Morgan Securities Services was looking into OTC derivatives and collateral management. One of the top three presentations of the conference. Very informative and focused on practical issues like exposure monitoring, cash collateral, securities collateral, UCITS lll and collateral, re-hypothecation / collateral optimization model.

Shravan Sood from The Bank of New York, covering the field dealing with Basel ll and Collateral Management. An outstanding presentation – from the top end according to the delegates evaluation as well. Key message regards to enterprise-wide collateral management would be to focus on utilizing multi-asset and multi-region inventories across multiple products on a single platform in risk-controlled environment offering richer functionality to both counterparts. He also touched on issues around automation on collateral movements credit repo and finding the right haircut but mostly focusing on regulatory capital standards.

Last but not least came Oliver Deutscher from DZ Bank AG shared the lessons learned form the early adopters of collateral management. The most challenging questions out of many mentioned in his presentation were what are the prime goals of collateral asset management and who is the center of competence and who is in charge of the program? Using his words: “Financial institutions / market participants need to expand their access and increase their awareness of value, availability, costs and use of collateral pools”

The day has gone very fast and the participants still had a lot to discuss during the final interactive discussion.

I wanted to thank all the speakers for their valuable contribution throughout the conference and to all the delegates to be very bright, lively and interactive participants.

Ester Bebar
Production Manager - Finance