Presentation is loading. Please wait.

Presentation is loading. Please wait.

GC Access Break-out session Euroclear Collateral Conference,

Similar presentations

Presentation on theme: "GC Access Break-out session Euroclear Collateral Conference,"— Presentation transcript:

1 GC Access Break-out session Euroclear Collateral Conference,
Tuesday, 13 May 2014

2 A market driven by new regulations
Themes Impact Solvency & liquidity High demand for high quality collateral and term lending Capital cost Indemnifications Repo market contraction? LCR, NSFR, Leverage ratio Counterparty exposure limits Basel III OTC Derivatives Punitive capital charges for non CCP cleared OTC Derivatives High demand for high quality collateral DF /EMIR Reducing systemic risk Minimum haircuts Increased transparency Limits on cash reinvestment Reduction Demand ? Funding cost Collateral velocity reduced? Shadow Banking Limit speculation Tax on financial transactions Requirement for reasonable expectation to borrow Increased cost to borrow Short Selling/FTT Increasing settlement efficiency Mandatory buy-ins Penalty regime Increased demand fails coverage CSDR

3 What about the future … ‘Repo and securities lending are set to play an absolutely central role in the post-reform landscape’ Quote from a speech given by Andrew Hauser, Head of Sterling Markets Division, Bank of England, and Chair of the Securities Lending and Repo Committee (At JP Morgan’s Collateral Management and Securities Financing Forum, March , London)

4 GC Access A new route to the market…
Drivers Trends Euroclear Offering Fail Curing Market volume driven Securitites lending and borrowing Automatic Borrowing Collateral conversion Increasing need for high quality collateral (EMIR, Dodd Frank, Basel III) GC Access Opportunity Borrowing Investment Strategies (short selling, cheapest to deliver, ..) Reduced leverage & limiting regulation 4

5 GC Access A new route to the market…
Direct exposure on Euroclear Bank Borrowers Direct Custodian/Agency Street lending Exclusives GC Access Unique positioning Leverage Euroclear’s 30 years+ risk management expertise in SLB to access the street lending market. Exposure is on Euroclear Bank, driver of the securities loan is street lending (a.o. to fail driven for the SLB program). Get collateral segregated in your securities account for maximum safety Settlement driven Automatic Fail Driven lending … building on 30 + years of experience 5

6 Collateral conversion
GC Access What’s in it for borrowers? Focus on high quality collateral Extension of existing autoborrow service You borrow from Euroclear Bank at street levels You pledge collateral to Euroclear Bank and authorize the unward pledge of the collateral to the lender Limited number of collateral profiles Collateralisation using TSL We do the rest! Collateral conversion Status Pilot activity started Q1 2014 Gradually building lending supply

7 GC Access What’s in it for Lenders?
Generate additional lending revenues The safest environment Complementary to our Automatic fail-driven lending program 30+ years of experience Similar legal protection and set-up Borrower community already in Euroclear Bank No additional workload, we take care of everything Benefit from Triparty collateral management without the need to be a Triparty specialist: we do the triparty set-up and instruct on your behalf No additional costs Positioning: Idea to convey here is that we are not comparable with a agent lender as we have a much greater span of control Also given the systemic importance of Euroclear we are subject to strong risk management and have may layers of defense in place

8 Pledge set-up benefits for borrowers
Pledge agreement Transfer of collateral from the borrower to Euroclear Bank, and From Euroclear Bank to the Lender The borrower remains the legal owner of the collateral securities Allows for unwind of the loan and recovery of collateral in default situations

9 Multiple lines of defence ensure the best lender protection …
Strict Borrower approval Stringent borrower admission process Specific GC Access credit line Borrower default has no impact on you Euroclear Bank guarantee (AA rated) covers all Borrower’s obligations Loan unwind in case of Euroclear Bank default Collateral in your name to protect against Euroclear Bank and Borrower default Positioning: As an ICSD we know that safety matters in today’s world more than ever and that is why we offer a unique lender protection The EB Guarantee is not new and something we have been offering for 30 years in our automatic program. If borrowers fails to return securities or enter into insolvency Euroclear steps in – Your risk is on Euroclear However we also recognise that you need protection in the unlikely event of EB insolvency and so we offer you a solution where in addition to he Guarantee you hold collateral in a segregated account in your name. Should EB default you can enforce your pledge and liquidate collateral Putting both these protection measures together is unique and offers you the safest possible environment

10 GC Access Operational Flow

11 GC Access Loan arrangement Loan Arrangement Loan Confirmation
Contact the Desk via Bloomberg, , or tel (bloomberg e mail) Send your locates or review pool availability Daily confirmation of trades end of day Pool Availability Borrower Request GCA Desk GCA Borrower Euroclear offer Loan Confirmation GCA Desk GCA Borrower

12 GCAccess Loan settlement – A pre-paid model
Collateral Collateral Collateral 1 Pledge Pledge Pre-collateralisation of loan exposure Triparty FOP Triparty FOP Borrower Main Trading account EB Account Lender collateral account Loan 2 Loan Loan Once collateralised Loan generation Settlement Delivery FOP Euroclear Bank Transit account Settlement Delivery FOP Lender Main Trading account

13 Loan Management Corporate Actions Monitoring Monitoring of
Income proceeds GCA Desk Lender Main Account Automatic compensation of income proceeds, redemptions, mandatory corporate actions A recall will be triggered if lenders wish to participate in a voluntary corporate action Lenders to instruct a recall for meetings if they wish to elect

14 Loan management Recalls Monitoring Monitoring of Settlement activity
Corporate actions GCA Desk Lender Main Account Recalls are generated Upon Lender request When a Lender has an upcoming delivery instruction For certain corporate actions Recall periods T + 2 or T+1 (UK Gilts, US Treasuries)

15 Reporting Data Information Report Frequency Format Channel
Collateral and Loans Position Security information (rating, country, issuer type, currency) Valuation Applicable haircut Margin report Once a day at the end of day CSV file Pdf Triparty Collateral and Exposure Statement 2, 14, or 16 times per day MT569 SWIFT Triweb 10 times per day MS access Secured website Collateral Security identification Statement of holding Once a day at end of day MT535 Loan balances and fees Loan balances Fees Loan balances and fees Optional (daily, weekly, monthly) Excel CSV PDF 15

16 GC Access How to get started to borrow?
Confirm Your agreement to the contractual documentation GC Access Terms and Conditions GC Access Operating Procedures Your reporting options Agree with EB on a dedicated credit line for GC Access activity Agree with credit documentation Credit letter GC Access General Conditions GC Access Collateral Agreement GC Access Securities Borrowing Conditions

17 GC Access How to get started to lend?
Register for the service by confirming: Your agreement to the contractual documentation GC Access Terms and Conditions GC Access Operating Procedures Your lender profile Your lending cap Your reporting options


Download ppt "GC Access Break-out session Euroclear Collateral Conference,"

Similar presentations

Ads by Google