Clearstream and BNP Paribas Securities Services (BNP Paribas) have signed a letter of intent to intensify their cooperation on collateral management: BNP Paribas customers will be able to consolidate their collateral holdings, via Clearstream's Global Liquidity Hub, to cover their global exposures from a single optimised collateral pool.
Customers gain a double benefit: they will retain their asset portfolios within BNP Paribas' proven and established custody network while Clearstream's collateral management engine allocates, optimises and substitutes collateral on a fully automated basis across the books of BNP Paribas.
This partnership offers clients the advantage of Clearstream's world-leading collateral management service coupled with BNP Paribas' highly-regarded agent bank service. Pooling collateral across the globe in one central hub while allowing collateral to remain in its custody location - i.e. agent banks or CSDs - brings cost savings and security to the client. Collateral consolidation enables the financial industry, and in particular sell-side firms, to reduce operational risks, operational costs and opportunity cost resulting from collateral fragmentation. Additionally, mutual clients of BNP Paribas and Clearstream will benefit from pooling and optimising collateral positions held in custody across the two organiqations against the rapidly expanding range of exposures covered by Clearstream's Global Liquidity Hub.
Jeffrey Tessler, CEO Clearstream, said: "We are delighted to extend our long-term partnership with BNP Paribas to add a fourth layer to our Global Liquidity Hub initiative: partnerships with agent banks. Liquidity Hub Connect builds on our established quad-party collateral management service established with them five years ago. This is a further example of Clearstream's commitment to strong partnership and we are expecting to add further agent banks to the model over the course of the coming months. We will also continue to grow the other pillars of the Global Liquidity Hub by entering further strategic partnerships with market infrastructures such as CSDs (1), accessing further CCPs (2) and signing further agreements for central bank money access (3) on a global basis."
Alain Pochet, Head of Clearing, Settlement and Custody at BNP Paribas Securities Services, said : "We are committed to providing our clients with maximum flexibility to manage their collateral requirements across key markets while delivering bespoke domestic and global settlement and custody services. Strategic partnerships, such as this first one with Clearstream, complement perfectly our collateral management offer as bilateral agent for buy side and sell side institutions."
This latest development builds on the success of the Liquidity Hub GO (Global Outsourcing) initiative Clearstream launched with Cetip, the Brazilian CSD, in July 2011. Liquidity Hub GO is now also being discussed with the Australian Securities Exchange and Strate, the South African CSD. Clearstream is the only collateral management services provider with a proven ability to manage collateral across time zones and regions while the assets stay in their respective domestic market and under local legislation.
The recently published Accenture/Clearstream report "Collateral Management: Unlocking the Potential in Collateral" revealed that the financial services sector could save more than 4 billion Euros annually by addressing operational inefficiencies: decentralized operations and unaligned business objectives are limiting banks' ability to manage collateral efficiently. As a result, banks are unable to mobilise liquidity, keep down financing costs and are forced to maintain excess collateral buffers.