RiskTech Forum

Enterprise Collateral Management

Posted: 18 October 2012  |  Author: Cassie Newland


Financial institutions have recently been forced to improve the efficiency of their collateral management systems significantly. Since 2008, considerable de-leveraging has taken place, while highly liquid assets have become scarcer as firms hoard cash and high quality assets. Regulation has further shrunk the pool of available collateral by forcing firms to hold more highly liquid assets and by increasing the collateralization of OTC derivatives trading.

To manage these more expensive and scarcer assets more efficiently, financial institutions need to ensure they have enterprise-wide views of their collateral position, counterparty credit risk, and liquidity. To maximize the value from their stock of collateral, firms need to integrate their collateral management functions with risk, treasury, and the front office. This will allow collateral to be used to decrease risk and to generate revenue. Collateral velocity is also increasingly important – financial institutions need to be able to deal with an increased volume and variety of collateral at greater speed.

The need for these adjustments and improvements to collateral management is driving financial institutions to invest in the robust technology systems that facilitate faster, more efficient collateral management. Technology systems for collateral management now require more advanced functionality, including integrated data models, enterprise-wide inventories, real-time collateral tracking and exposure monitoring, and enterprise collateral optimization.