Custodian BNP Paribas Securities Services and Euroclear Bank, the international central securities depository, have extended their joint tri-party collateral management service to include four new markets: Belgium, France, Germany and the Netherlands.
The service was introduced in Italy and Spain last year and is used by investment banks and brokers. The partnership enables these mutual sell-side clients to optimise equities and fixed-income securities collateral held in both companies’ books in these six domestic markets for use in tri-party transactions managed by Euroclear Bank. The securities can be returned to clients’ domestic accounts as and when required.
The extension is part of Euroclear’s Collateral Highway, which was launched in July 2012 to help mobilise collateral across borders. It links commercial and other capital market infrastructure providers across time zones and markets.
Collateral has become a key focus for the industry following new OTC derivatives rules, which require market participants to centrally clear trades in Europe and the US. With Basel III rules also requiring banks to hold more capital, there have been concerns of a possible collateral shortage.
Frederic Hannequart, chairman of Euroclear Bank, says: "Our partnership with BNP Paribas, which now spans six European capital markets, is part of the on-going extension of the Collateral Highway to more markets globally. Our joint customers can now take a holistic approach to collateral management and this service affords them the highest levels of cost and risk efficiencies when sourcing and allocating securities. Together with BNP Paribas, we are delivering a client-driven solution that hinges on open-source portfolio optimization."
Alain Pochet, head of clearing, custody and eettlement at BNP Paribas Securities Services, says: "Our Collateral Access - Connect service, which enables us to establish links with institutions such as Euroclear Bank while keeping our clients’ assets segregated, is an excellent example of how the industry can work together to help customers access collateral easily and efficiently."
This week, Euroclear has also announced it was partnering up with the Depository Trust and Clearing Corporation to launch a new collateral processing infrastructure. The joint venture will focus on providing straight through processing to the settlement of margin obligations and helping collateral optimisation. The project is still subject to several conditions, including completion of documentation, final approval from the boards and receipt of any necessary regulatory approvals.