Strate and Clearstream team up to tackle collateral
01 November 2013 South Africa
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The South African central securities depository, Strate, and Clearstream have jointly launched a centralised collateral management service for the South African financial market.
A release from both firms stated that some of South Africa's largest financial institutions, including banks, a number of fund managers and the Johannesburg Stock Exchange (JSE), have already committed to exploring the use of these services.
The statement explained the reasoning behind the launch as regulatory-focused, due to future rulings such as Basel III or Solvency II placing pressure on the availability and funding costs associated with holding high-quality liquid assets.
"In addition, the G-20 finance ministers have also recommended that all standardised OTC derivatives should be cleared with central counterparties (CCPs)."
"The cumulative effect of each of these changes, the need for greater transparency as well as the specific South African regulatory and legislative obligations stated in the Financial Markets Act and Regulation 28 of the Pension Funds Act, point to a re-think of collateralisation in the industry."
Strate's strategic projects director, Anthony van Eden, explains that there has been an overwhelming interest from the local market for the use of the service. 鈥淲e are also in discussion with a number of other financial institutions, in addition to the ones named above, who are seeing the benefit of this industry-wide initiative and exploring the use of the service.鈥�
Stefan Lepp, head of global securities financing at Clearstream, said: 鈥淲e are delighted that we have partnered with Strate in South Africa to assist financial institutions in managing their domestic collateral more efficiently.鈥�
As part of its risk and liquidity management offering, Clearstream has developed a collateral management outsourcing solution allowing its market infrastructure partners such as Strate to manage the collateral of their underlying client base.
The assets never leave the domestic environment and remain under local jurisdiction. Contractual agreements between the partner, Strate, and its domestic client base remain unchanged. The initiative has gained momentum, as upcoming regulatory changes require financial and non-financial institutions to improve their capital management.
A release from both firms stated that some of South Africa's largest financial institutions, including banks, a number of fund managers and the Johannesburg Stock Exchange (JSE), have already committed to exploring the use of these services.
The statement explained the reasoning behind the launch as regulatory-focused, due to future rulings such as Basel III or Solvency II placing pressure on the availability and funding costs associated with holding high-quality liquid assets.
"In addition, the G-20 finance ministers have also recommended that all standardised OTC derivatives should be cleared with central counterparties (CCPs)."
"The cumulative effect of each of these changes, the need for greater transparency as well as the specific South African regulatory and legislative obligations stated in the Financial Markets Act and Regulation 28 of the Pension Funds Act, point to a re-think of collateralisation in the industry."
Strate's strategic projects director, Anthony van Eden, explains that there has been an overwhelming interest from the local market for the use of the service. 鈥淲e are also in discussion with a number of other financial institutions, in addition to the ones named above, who are seeing the benefit of this industry-wide initiative and exploring the use of the service.鈥�
Stefan Lepp, head of global securities financing at Clearstream, said: 鈥淲e are delighted that we have partnered with Strate in South Africa to assist financial institutions in managing their domestic collateral more efficiently.鈥�
As part of its risk and liquidity management offering, Clearstream has developed a collateral management outsourcing solution allowing its market infrastructure partners such as Strate to manage the collateral of their underlying client base.
The assets never leave the domestic environment and remain under local jurisdiction. Contractual agreements between the partner, Strate, and its domestic client base remain unchanged. The initiative has gained momentum, as upcoming regulatory changes require financial and non-financial institutions to improve their capital management.
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