CHALLENGE 6/8: COLLATERAL AND TREASURY OPTIMISATION - HOW WELL ARE YOU MANAGING YOUR CAPITAL?
Managing capital, liquidity and collateral across a portfolio that spans multiple jurisdictions requires careful planning and execution, to avoid expensive and inefficient allocations.
- Opening new EU entities or expanding existing ones requires incremental capitalisationand funding.
- Credit ratings agencies will need to be engaged in order to secure credit ratings and regulators will want to understand the sustainability of the new entity’s financial position and stability.
- Asset migration can reduce the available netting and increase risk weighted assets which results in capital lockups becoming more expensive.
- When the current client portfolio is split across UK and EU jurisdictions, the collateral pool is split,impacting liquidity and cost of collateral allocation.
- Split portfolios will impact the HQLA and make liquidity management challenging.
WHAT CAN CAPCO OFFER?
- Within the Collateral space, there are legacy and phased regulations that will require ‘strategic’attention. There are also new, incoming regulations that will require industry focus to ensure regulatory deadlines are met – e.g. CSDR, MRUD, Basel IV, SFTR.
- The regulatory landscape needs to be viewed through a more holistic, wide angle lens. Thiswill enable the identification of commonality in requirements across regulations; realise similarthemes across various silo driven projects; and allow for the implementation of a consistent delivery model across business and technology, irrespective of regulation type. Capco has demonstrated strong experience in delivering large scale transformational Regulatory programmes within tight deadlines whilst navigating through (often fragmented) internal landscapes and priorities.
THE CAPCO ADVANTAGE
Capco adds significant value to Collateral and Treasury functions by bringing in a solid approach, witha strong framework and governance, as well as industry SMEs who can optimise capital and facilitate business engagement. Our external perspective challenges banks to look beyond the ‘as-is’, through questioning and highlighting the art of the possible. To support lower resource costs, and fewer manual errors, our teams create client segmentation profitability models, then provide an innovative strategy to automating on-boarding, off-boarding and re-papering activities.