BNP Paribas Securities Services (BNP Paribas), a global custodian with over USD 7 trillion in assets under custody, and Euroclear Bank today announces the launch of their joint tri-party collateral management arrangements via Euroclear's Collateral Highway.
The initiative enables mutual clients to access securities held at BNP Paribas Securities Services as collateral for tri-party operations conducted by Euroclear Bank.
BNP Paribas and Euroclear Bank entered into a collaboration agreement in 2012 and have since been working together to develop the joint initiative to support clients in sourcing securities to meet their growing collateral needs. High demand, stricter risk management practices and new regulation are increasing the need for collateral at a time when high-grade collateral is increasingly difficult to source easily.
Frederic Hannequart, Chairman of Euroclear Bank, said: "This partnership is particularly timely and important as demand for collateral continues to increase. By joining forces, we alleviate one of the challenges of collateral fragmentation by making the transfer of collateral to the right place at the right time as seamless and operationally simple as possible. As the first agent bank live on our Collateral Highway, we applaud BNP Paribas' foresight and drive to offer their clients a flexible and innovative option to ease collateral flows. We are delighted to be partnering with them."
The BNP Paribas/Euroclear Bank collateral transfer arrangement ensures that mutual clients of both institutions achieve greater risk protection and manage their available assets more efficiently. In this collaboration, securities held in local custody with BNP Paribas may be used as collateral in triparty collateral management deals managed by Euroclear Bank.
Alain Pochet, Head of Clearing, Settlement and Custody at BNP Paribas Securities Services, said: "This is a major achievement for both parties, and comes at a very appropriate timing for our clients who face significant regulatory changes. From today, they will be able to flawlessly finance their available securities, which will help them address the ever-increasing demand for collateral.
"The first trade completed through this partnership was executed in the Spanish market. It allowed our mutual client to use available securities held with BNP Paribas Securities Madrid as collateral for the tri-party transaction administered by Euroclear Bank
This resulted in increased purchasing power for the client. The transaction was easy and successful, and we are confident that this collaboration will continue to bear fruit in future - in fact, this same service is already available in the Italian market as well."
BNP Paribas and Euroclear Bank are currently working to extend the scope of the arrangement to the main European and Asian markets.