Last week, I introduced Accenture and Clearstream’s research on unlocking the potential in collateral management This week, I’ll talk about how addressing these inefficiencies can reduce costs—and enable new businesses.
The majority of our survey respondents stated that addressing internal efficiencies can streamline internal processes, enhance visibility of asset classes and enable better decision making.
Further, they noted some key internal inefficiencies:
- Incomplete overview of all collateral
- Inability to manage collateral centrally
- Inability to maximize liquidity, as well as lower the cost of and lengthen the tenor of funding
Most respondents viewed external fragmentation as a result of the need for counterparties to take delivery of collateral, which creates a pool of local liquidity.
Survey respondents identified the following external inefficiencies:
- Costs associated with moving collateral between pools
- Excessive IT costs due to the development and maintenance of multiple interfaces with external providers and internal pools
- Maintaining excessive levels of collateralization, or over-collateralization
Overall, we found that 38 percent of survey respondents have reduced internal inefficiency costs over the past three years, and 25 percent have reduced external inefficiency costs. Finally, there was consensus that the greatest potential for creating value lies in:
- Addressing the inability to maximize liquidity
- Lowering the cost of financing
- Lengthening the tenor of funding
What do you think? Do you agree with this picture of collateral management? I’m keen to hear your thoughts. In addition, if you have any suggestions for a collateral-related topic you’d like to discuss in future posts, please leave a comment.