Global banking house Citi will expand its custody offering to include segregated collateral accounts as central counterparties (CCPs) prepare to offer such accounts in line with new regulations.
Citi has expanded its OpenInvestor suite to include segregated collateral custody accounts to help clients mitigate counterparty risk and drive greater collateral efficiency, it announced today.
Both Title VII of the US Dodd-Frank Act and the European markets infrastructure regulation (EMIR) require buy-side firms seeking the safest collateral options to establish segregated accounts with CCPs for OTC derivatives trades.
“The possibility that every OTC relationship may need collateral accounts under new regulations has driven client demand for more efficient solutions,” said Chandresh Iyer, managing director, investor services, at Citi.
“These services draw upon our deep understanding of relevant business issues to streamline the technical and operational challenges of managing all types of collateral assets across multiple counterparties,” he said.
Under the new offering, Citi will act as an intermediary between investor and secured party for tri-party collateral account control arrangements, holding collateral in a segregated custody account. Daily collateral monitoring and the ability to reinvest cash collateral into money market funds through a central online portal will also be available.
In the UK, buy-side firms are keen to establish segregated accounts with CCPs as they prepare to meet EMIR rules, but clearing houses have been slow to develop the accounts.
Jane Lowe, director of markets for UK buy-side trade body the Investment Management Association in December told theTRADEnews.com that UK institutional investors wanted more progress on segregated accounts.
“Clearing houses have been working on a client account that offers the highest level of security for assets and positions since last year, but none are ready yet,” Lowe said. “Some on the buy-side want to adapt to the new clearing regime now, but CCPs have not yet established the details of these fully segregated accounts.”