Global custodian BNP Paribas Securities Services (BNP Paribas) and Euroclear Bank have jointly launched their tri-party collateral management arrangements via Euroclear’s Collateral Highway, enabling mutual clients to access securities held at BNP Paribas Securities Services as collateral for tri-party operations conducted by Euroclear Bank.
The two banks entered into a collaboration agreement in 2012 and have worked together to develop the initiative to support clients in sourcing securities to meet their growing collateral needs. High demand, stricter risk management practices and new regulation are increasing the need for collateral at a time when high-grade collateral is increasingly difficult to source easily.
“This partnership is particularly timely and important as demand for collateral continues to increase,” said Frederic Hannequart, Euroclear Bank’s chairman. “By joining forces, we alleviate one of the challenges of collateral fragmentation by making the transfer of collateral to the right place at the right time as seamless and operationally simple as possible.
The BNP Paribas/Euroclear Bank collateral transfer arrangement aims to ensure that mutual clients of both institutions achieve greater risk protection and manage their available assets more efficiently. In this collaboration, securities held in local custody with BNP Paribas may be used as collateral in triparty collateral management deals managed by Euroclear Bank.
Alain Pochet, head of clearing, settlement and custody at BNP Paribas Securities Services, added: “This is a major achievement for both parties, and comes at a very appropriate timing for our clients who face significant regulatory changes.
“The first trade completed through this partnership was executed in the Spanish market. It allowed our mutual client to use available securities held with BNP Paribas Securities Madrid as collateral for the tri-party transaction administered by Euroclear Bank.”
The two parties are currently working to extend the scope of the arrangement to the main European and Asian markets.
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