Banks could benefit from up to 鈧�40 billion
03 July 2014 Frankfurt
Image: Shutterstock
A Clearstream-sponsored study has revealed the need for a 鈥渃ollateral value chain鈥� in order to enable up to 鈧�40 billion in equity capital savings for European banks.
A 鈥渃ollateral value chain鈥� is defined in the study as a succession of sequential steps that make it possible to select securities, ensure their availability and the robustness of the liquidation process.
The study has been based on a qualitative and quantitative survey by Elton-Pickford of 22 institutions, including banks, of which the European Central Bank considers eight as 鈥渟ystemic鈥�.
According to the Basel III and Dodd Frank regulations, banks are required to increase their levels of equity to strengthen their solvency in case of crisis.
The assets are weighted as a function of their risk to assess the impact on the balance sheet and to adjust the necessary quantity of equity. Banks are therefore striving to hold as much high quality liquid assets as possible to reduce the amount of required equity.
St茅phane Panzani, managing director at Elton-Pickford, said: 鈥淒uring the interviews we held with various financial institutions, the market need for a collateral value chain became clear.鈥�
鈥淐learstream鈥檚 Global Liquidity Hub has emerged as one of the most efficient systems for improving this collateral efficiency. By applying this concept, financial institutions could benefit from significant cost savings of up to 鈧�40 billion in Basel III equity capital savings.鈥�
Clearstream鈥檚 executive board member in charge of Global 麻豆传媒 Financing, Stefan Lepp, commented: 鈥淭he Elton-Pickford study confirms the already widely discussed savings potential through optimal collateral management; but the concept of building a 鈥榗ollateral value chain鈥� is new.鈥�
鈥淥ur Global Liquidity Hub offers services, which effectively already provide customers with access to High Quality Liquid Assets through a collateral value chain and helps them make the most of their assets.鈥�
Regulators also demand a greater protection of banks against a liquidity crisis by setting aside good quality liquid assets that can be sold quickly for cash.
According to the study, the challenge is to make the right selection of 鈥渓iquid鈥� assets and to put in place necessary contracts and the procedures for selling these assets for cash.
Collateral management and collateral optimisation are the appropriate tools for both banks and the buyside for maximising the use of these securities and the Clearstream/Elton-Pickford study confirms that collateral optimisation is currently a priority for major European participants in financial markets.
A 鈥渃ollateral value chain鈥� is defined in the study as a succession of sequential steps that make it possible to select securities, ensure their availability and the robustness of the liquidation process.
The study has been based on a qualitative and quantitative survey by Elton-Pickford of 22 institutions, including banks, of which the European Central Bank considers eight as 鈥渟ystemic鈥�.
According to the Basel III and Dodd Frank regulations, banks are required to increase their levels of equity to strengthen their solvency in case of crisis.
The assets are weighted as a function of their risk to assess the impact on the balance sheet and to adjust the necessary quantity of equity. Banks are therefore striving to hold as much high quality liquid assets as possible to reduce the amount of required equity.
St茅phane Panzani, managing director at Elton-Pickford, said: 鈥淒uring the interviews we held with various financial institutions, the market need for a collateral value chain became clear.鈥�
鈥淐learstream鈥檚 Global Liquidity Hub has emerged as one of the most efficient systems for improving this collateral efficiency. By applying this concept, financial institutions could benefit from significant cost savings of up to 鈧�40 billion in Basel III equity capital savings.鈥�
Clearstream鈥檚 executive board member in charge of Global 麻豆传媒 Financing, Stefan Lepp, commented: 鈥淭he Elton-Pickford study confirms the already widely discussed savings potential through optimal collateral management; but the concept of building a 鈥榗ollateral value chain鈥� is new.鈥�
鈥淥ur Global Liquidity Hub offers services, which effectively already provide customers with access to High Quality Liquid Assets through a collateral value chain and helps them make the most of their assets.鈥�
Regulators also demand a greater protection of banks against a liquidity crisis by setting aside good quality liquid assets that can be sold quickly for cash.
According to the study, the challenge is to make the right selection of 鈥渓iquid鈥� assets and to put in place necessary contracts and the procedures for selling these assets for cash.
Collateral management and collateral optimisation are the appropriate tools for both banks and the buyside for maximising the use of these securities and the Clearstream/Elton-Pickford study confirms that collateral optimisation is currently a priority for major European participants in financial markets.
NO FEE, NO RISK
100% ON RETURNS If you invest in only one securities finance news source this year, make sure it is your free subscription to 麻豆传媒 Finance Times
100% ON RETURNS If you invest in only one securities finance news source this year, make sure it is your free subscription to 麻豆传媒 Finance Times
