16 FebIntraday Liquidity. Intra-day collateral management.

With new rules coming into effect on Jan 1 2015, this is the sixth in a series of posts on how banks and FI’s might adapt.  

NEWS: From next week the book: Cash & Liquidity Management, Mastering the Challenges of New Regulations and a Changing Marketplace, will be available on Kindle and in print.

Intra-day collateral management

If an FI has made the investment to get to this point, integrating all the real-time data to form an up to date intra-day view of the cash position, then almost all of the heavy lifting has been done to have an intra-day view of the securities transactions and with that the securities positions.

When the term “Collateral Management” is used in Financial Services, sometimes it refers to securities management and sometimes it refers to securities and cash management. The latter makes sense; both cash and securities are collateral. The wiser FI’s even lump things together under “Cash & Collateral Management” or “Cash & Collateral Trading.” A holistic view is required that looks at both cash & securities.

Real-time, intra-day management of securities positions has some degrees of difficulty to it that cash does not have; securities have to be managed as individual positions, some of them can be used as general collateral, i.e. several different securities are considered equal, others are managed individually as “specials”.

It would exceed the scope of this blog to explore the securities side of collateral management and it will have to suffice to say that it is no less important and if an FI has gone to the trouble of planning the full integration of its cash management information, then it ought to go the extra yard and include its securities in that programme.

Lessons Learned: Measuring is one thing and for all FI’s, this is the year they must at least measure. Those, and I suspect it will be few, who can do more than the minimum need to look at both cash and securities and ensure that all information is integrated.

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