CeTIF and TAS Group Complete Collateral Management Research

Italy-based research group CeTIF and software provider TAS Group have completed their joint research entitled ‘Collateral Management: Strategic and Operational Implications’. The study, involving 11 intermediaries operating in Italy, aimed to investigate the use of collateral to minimise risk in over-the-counter (OTC) derivatives negotiation and its more recent application in interbank liquidity management.

The research shows that all intermediaries involved in OTC derivatives rely on collateral management to mitigate counterparty risk and over 80% of them use it regularly in the majority of their transactions. The use of collateral for liquidity management still has room for growth, as only 55% of intermediaries use collateral to improve funding operations and 27.5% for lending purposes. The main advantage gained by banks is the ability to collect more liquidity with lower funding and transaction costs.

The survey also shows that the growing importance of collateral is leading financial institutions to rethink the organisational role of the collateral manager; evolving from a supporting function to a central role whose mission is to improve core business performance.

Information technology (IT) emerges as a key area for improvement, enabling:

  • Reduced operational costs and risks.
  • Reduced settlement costs and risks.
  • The evolution of the organisation towards a more integrated model.

These goals can be achieved through the implementation of more integrated IT systems, including even external triparty services, to reduce manual intervention and provide a single view to all organisational units which can be personalised according to their needs.

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