Collateral requirements hitting insurers and pension funds for OTC derivatives
BNY Mellon is hoping to leverage a broad service platform with multiple services as the industry becomes more complex and collateral requirements more onerous. December 08, 2011 | Peter HoflichHaving built the components of a derivatives business under Mellon Financial Corporation, upon the 2007 merger with Bank of New York the new BNY Mellon has been able to expand its derivatives platform to include all elements of execution and post-trade operations with asset servicing and collateral management. Targeting insurers and pension funds, investment managers and central banks, the custodian bank has become a market counterparty to trade US dollar swaps, equity swaps and foreign exchange OTCs, allowing clients to break up the process to take on the parts they need. The bank also gains a significant amount of cross-sell from asset management boutiques that it has under its roof that leverage the derivatives platform, branded as Derivatives360. The need to engage expert services is expanding rapidly. “With Solvency 2 coming up [for insurers], you’ve got to collatoralise all your OTC exposures, under Basel III there are capital charges for credit value adjustments that can be reduced if you collateralise, and you’ve got independent valuations for OTCS growing in importance - mandatory in some jurisdictions like Germany, Ireland, etc— so you can scrub your value against the counterparty's ,” says Jonathan Bowler, managing director of BNY Mellon’s Derivatives 360 for the EMEA and APAC regions. In the past, collateral used to be posted once every two weeks and reconciled once a month, now IDSA is recommended that it’s done every day and to the penny in order to control exposures, increasing the demands on industry participants. BNY Mellon favours owning the full process as a way of deepening relationships and encouraging cross-sell, as opposed to some in the OTC derivatives processing space who might prefer to focus only on the execution parts that earn them the most profit or strategic advantage. “Different things will appeal to different organisations—some people like to keep the trade matching to th... Please login to read the complete article. If you already have an account, you can login now or subscribe/register.
Categories: Asset Management, Trustees and Custodians, Markets & Exchanges, Trade Finance, Transaction BankingTrustees Custodians and Depositories,Markets Exchanges,Trade Finance,Transaction Banking, Asset Management, Trustees and Custodians,Markets & Exchanges,Trade Finance,Transaction Banking, Keywords:BNY Mellon, Jonathan Bowler, OTC Derivatives, Collateral Requirements, Custodian Bank, EMEA, APAC, Dodd Frank, CCP, G7 BNY Mellon, Jonathan Bowler, OTC Derivatives, Collateral Requirements, Custodian Bank, EMEA, APAC, Dodd Frank, CCP, G7
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