Citigroup is to provide the European Investment Bank (EIB) with a comprehensive solution for its derivatives collateral management.
The EIB, the financing institution of the European Union, has appointed Citi as its collateral management and collateral custody agent responsible for the EIB's derivatives collateral management functions.
Citi confirmed that it would act as collateral agent to the EIB and that Citi's OpenCollateral service would take responsibility for marking derivatives collateral to market, carrying out margin calls and settlement responsibilities. The EIB will continue to value its own derivatives transactions to preserve confidentiality with counterparties. Citi will also act as Global Custodian for the securities collateral.
"Citi has been selected by the EIB as a supplier that can combine collateral management services with global custody and provide all the services associated with the maintenance of a large collateral portfolio necessary for derivatives trading," said Rajen Shah, Global Head of Collateral Management, Global Transaction Services, Citi.
"EIB has decided to continue the outsourcing of its derivatives collateral as this has been proven to be a cost effective and flexible solution, which can be efficiently combined with internal valuation of the derivatives transactions," added Anneli Peshkoff, Director of EIB's Treasury Department. "The automatic scalability of the outsourced functions to the size of the collateral portfolio has been an important consideration in the decision."
Citi is increasingly involved in supplying third-party services as an integral component of its derivatives servicing capabilities.This enables buy-side players to delegate certain functions, generally back office and derivatives clearing services, which improves customer efficiencies across a number of collateral management-related business areas. Through its Collateral Management Unit, Citi offers clients the full breadth of collateral services including exposure monitoring, margin calling, collateral optimization and rehypothecation.