A group of five central securities depositories (CSDs) from around the world have formed a liquidity alliance designed to help solve the global collateral shortage prompted by the 2007 financial crisis and subsequent regulatory changes.
Australia's ASX, Brazil's Cetip, Germany's Clearstream, Spain's Iberclear and South Africa's Strate say that they will work together to help address the global collateral crunch.
The financial crisis prompted regulators to make risk avoidance their top priority, bringing in a raft of new legislation, including Dodd-Frank, Emir, and CRD IV.
This, says the new group, has left the financial services industry short of liquidity and collateral at a time when new capital rules make banks unwilling to lend. According to April estimates by the Basel Committee on Banking Supervision, banks in Europe alone are facing an aggregate shortfall of stable funding of EUR2.78 trillion in fulfilling the additional liquidity requirements of Basel III.
The five members - who hope to bring in more CSDs in the future - plan to tackle this issue by exchanging information, identifying common needs and extending global collateral solutions while encouraging the development of research. They will meet each quarter to discuss partnership plans, developments, commercial opportunities in collateral management, and to share individual market news.
The alliance is an extension of deals that Clearstream has struck with each of the other members recently, signing them to its collateral management system, the Global Liquidity Hub.
Stefan Lepp, CEO, Clearstream Banking, says: "Optimising collateral means creating and utilising the widest possible collateral pools without jeopardising individual and country-specific requirements and the Liquidity Alliance is a major step in delivering a truly global liquidity and collateral pool."