Can a cross-functional group at a financial services firm bring down the cost of collateral management?
“So, I think the cross-functional group doesn’t directly bring down the cost of collateral. But if you’re pooling different expertise within your organization, you’re addressing the larger scope of problems. You’re not looking at just, ‘How do I operationally process a margin call?’ ” says Diana Shapiro, a director and NAM head of collateral services for Citi, in a video interview with FTF News.
If firms can open the collateral management process across disciplines, new tactics can be explored and new questions can be asked. For instance, firms can step back and ask what assets they should be posting, Shapiro says.
“Maybe you were originally using cash because cash is really easy to post. But maybe you should be posting securities? And then if you want to post securities, how does that fit into the profile of the fund? How are you sourcing those assets in the front office?” Shapiro asks. “You start to have more options in terms of how you address your collateral strategy from an operational perspective when you ‘re thinking more holistically about the challenges that specific fund may have, and how do you overcome those challenges.”
Shapiro took questions about the cross-functional approach and other issues during a video interview at FTF’s DerivOps North America conference in Chicago this past April. She was also a panelist for a session, “The High Costs of Collateral,” that focused on the growing number of margin calls in the aftermath of the “Big Wave” of new initial and variation margin rules. This latest wave is transforming collateral management and margining.
FTF has slated the next DerivOps North America conference for May 6-7, 2019, again in Chicago at the JW Marriott.
CREDITS:
Video Production: Janene Knox and William J. Poznanski, Jr.
Interview conducted by: Eugene Grygo, chief content officer, FTF News
Co-Producers: Sarah Hathaway, vice president, Financial Technologies Forum (FTF) and Eugene Grygo
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