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COLLATERAL MANAGEMENT // BLOOMBERG COLLATERAL MANAGEMENT 15 // OCTOBER // 2015
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BLOOMBERG COLLATERAL MANAGEMENT
15 // OCTOBER // 2015
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REGULATION IS DRIVING A LARGER GLOBAL COLLATERAL REQUIREMENT
» In the days following the Financial Crises of 2008+ a significant increase in financial regulation was proposed in a drive to increase transparency and reduce systemic risk
• Dodd-Frank (US)• EMIR (Europe)
» Regulators wish to decrease the effect of counterparty default, and increase market stability by requiring parties to post more collateral against more derivative trades and for Financial Institutions (FIs) to hold more capital
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CENTRAL COUNTERPARTY CLEARING REQUIRES A LOT OF COLLATERAL
IM and VM
VM
Counterparty A
Counterparty B
Counterparty A
Counterparty BCCP
IM and VM
Bilateral trade
Centrally cleared trade
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AND MARGIN REQUIREMENTS FOR NON-CENTRALLY CLEARED DERIVATIVES ARE ALSO IMMINENT
March 2015BCBS: Basel Committee on Banking SupervisionIOSCO: International Organization of Securities Commissions
Mar 2017Mar 2017
Sep 2018Sep 2018
Sep 2019Sep 2019
Sep 2020Sep 2020
Sep 2016Sep 2016
Sep 2017Sep 2017
Bilateral VM requirement on non-cleared derivatives
Bilateral IM requirement on non-cleared derivatives
All other covered entities
Sep 2016Sep 2016
> € 3tr*
> € 3tr > €2.25tr > € 1.5tr > €
0.75tr > € 8bn
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WHICH MEANS THERE WILL BE MANY MORE COLLATERAL AGREEMENTS AND MANY MORE MARGIN EVENTS
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THIS MEANS WE NEED TO DO A BETTER JOB OF MANAGING COLLATERAL
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WHICH MEANS A BETTER UNDERSTANDING OF OUR POSITION
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HOW MUCH TO POST
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WHICH MEANS A BETTER UNDERSTANDING OF OUR POSITION
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WHAT IS ELIGIBLE TO POST
HOW MUCH TO POST
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WHICH MEANS A BETTER UNDERSTANDING OF OUR POSITION
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WHAT IS ELIGIBLE TO POST
HOW MUCH TO POST
WHAT IS AVAILABLE TO POST
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BETTER COLLATERAL MANAGEMENT 2015 BUILD
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AND DO A BETTER JOB OF MANAGING CONNECTIONS
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BLOOMBERG CONNECTS YOU TO DATA12
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BLOOMBERG CONNECTS YOU TO THE MARKET
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BLOOMBERG CONNECTS YOU TO PRICING MODELS
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00:30.0000:30.00
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BLOOMBERG CONNECTS YOU TO PRICING MODELS
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BLOOMBERG CONNECTS YOU TO YOUR DOCUMENTATION
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BLOOMBERG CONNECTS YOU TO EACH OTHER
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WHY IS COLLATERAL IMPORTANT FOR DERIVATIVE PRICING?
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» How to price a swap:
• A - use the correct projection curve – get the floating leg correct
• B - use the correct discount curve – get the NPV correct
» Discounting a collateralised swap is about understanding the cost of borrowing and lending the collateral
WHICH COLLATERAL?
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BLOOMBERG COLLATERAL MANAGEMENT PLATFORM
Collateral Management
MTM Calculation
IM Calculation
Margin Call Management
Dispute Management
Internally-sourced
Collateral Valuations
Optimization
Reconciliation
Inventory Management
Legal Agreement Repository
Electronic Call Messaging
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CONTACTS>>>>>>>>>>>>>>
PHIL [email protected]+44 20 3525 9653CHRISTINA GROTH-BISWAS (PM - LONDON)[email protected]+44 20 3525 9611JOE STREETER (PM - NYC)[email protected]+1 212 617 7933
