BNP Paribas Securities Services is extending its collateral management service to include centrally-cleared over-the-counter (OTC) derivatives introduced by new regulation, helping institutional investors reduce the associated costs and complexities.
Institutional investors have historically been used to dealing with “normal” non-centrally cleared OTCs. However, the introduction of the Dodd-Frank Act in the US and European Market Infrastructures Regulation is set to drive a significant amount of OTCs onto electronic platforms and cleared by central counterparties.
Delivered via a real-time view of both centrally and bi-laterally cleared trades, BNP Paribas’ service helps institutional investors manage both collateral and risk measurement across multiple counterparties – dealers, clearers and central counterparties – and changing eligibility requirements.
Commenting on the development, Helene Virello, Head of collateral management at BNP Paribas Securities Services, says: “The new regulatory environment, while undoubtedly the best thing for our clients and the longevity of the financial markets, is still viewed with some trepidation by many in the industry.
“Indeed the changing environment does present a challenge to some market participants who are not best equipped to deal with certain changes, but that is where BNP Paribas can help its clients get ahead of the competition.
“Centrally-cleared OTC derivatives is one such area and institutional investors – for all their expertise in using OTC products – have simply never had to deal with clearing them centrally,” adds Virello, who is also in charge of OTC independent valuation services at the bank.
“We are delighted to simplify the clearing process on our clients’ behalf – a critical factor in helping them avoid the associated funding costs and increased complexities, ultimately allowing them to concentrate on their core business activities,” Virello says. The service will be fully operational in Q1 2012.