GC Access Break-out session Euroclear Collateral Conference, Tuesday, 13 May 2014

GC Access
Break-out session
Euroclear Collateral Conference,
Tuesday, 13 May 2014
A market driven by new regulations
Themes
Impact
• High demand for high quality
collateral and term lending
• Capital cost Indemnifications
• Repo market contraction?
Solvency
& liquidity
Basel III
• LCR, NSFR, Leverage ratio
• Counterparty exposure limits
OTC
Derivatives
DF /EMIR
• Punitive capital charges for non
CCP cleared OTC Derivatives
• High demand for high quality
collateral
Reducing
systemic risk
Shadow
Banking
• Minimum haircuts
• Increased transparency
• Limits on cash reinvestment
• Reduction Demand ?
• Funding cost
• Collateral velocity reduced?
Limit
speculation
Short
Selling/FTT
• Tax on financial transactions
• Requirement for reasonable
expectation to borrow
• Increased cost to borrow
Increasing
settlement
efficiency
CSDR
• Mandatory buy-ins
• Penalty regime
• Increased demand fails
coverage
2
What about the future …
‘Repo and securities lending are set to play an absolutely
central role in the post-reform landscape’
Quote from a speech given by Andrew Hauser, Head of Sterling
Markets Division, Bank of England, and Chair of the Securities
Lending and Repo Committee
(At JP Morgan’s Collateral Management and Securities Financing Forum, March 27 2014, London)
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GC Access
A new route to the market…
Drivers
Trends
Fail
Curing
Market volume driven
Collateral
conversion
Increasing need for
high quality collateral (EMIR,
Dodd Frank, Basel III)
Euroclear Offering
Automatic
Borrowing
Securitites
lending and
borrowing
Opportunity
Borrowing
GC Access
Investment Strategies
(short selling, cheapest
to deliver, ..)
Reduced leverage &
limiting regulation
4
GC Access
A new route to the market…
Direct exposure on
Euroclear Bank
Borrowers
Direct
Custodian/Agency
Exclusives
Street
lending
GC Access
Settlement
driven
Automatic Fail
Driven lending
… building on 30 + years of experience
5
GC Access
What’s in it for borrowers?
• Focus on high quality collateral
• Extension of existing autoborrow service
• You borrow from Euroclear Bank at street levels
• You pledge collateral to Euroclear Bank and authorize the
unward pledge of the collateral to the lender
• Limited number of collateral profiles
• Collateralisation using TSL
• We do the rest!
Status
• Pilot activity started Q1 2014
Collateral
conversion
• Gradually building lending supply
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GC Access
What’s in it for Lenders?
• Generate additional lending revenues
• The safest environment
• Complementary to our Automatic fail-driven lending program
► 30+ years of experience
► Similar legal protection and set-up
► Borrower community already in Euroclear Bank
• No additional workload, we take care of everything
► Benefit from Triparty collateral management without the need
to be a Triparty specialist: we do the triparty set-up and instruct
on your behalf
► No additional costs
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Pledge set-up benefits for borrowers
• Pledge agreement
►
Transfer of collateral from the borrower
to Euroclear Bank, and
►
From Euroclear Bank to the Lender
•
The borrower remains the legal owner
of the collateral securities
•
Allows for unwind of the loan and recovery
of collateral in default situations
8
Multiple lines of defence ensure
the best lender protection …
• Strict Borrower approval
►
Stringent borrower admission process
►
Specific GC Access credit line
• Borrower default has no impact on you
►
Euroclear Bank guarantee (AA rated)
covers all Borrower’s obligations
• Loan unwind in case of Euroclear Bank default
• Collateral in your name to protect against
Euroclear Bank and Borrower default
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GC Access
Operational Flow
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GC Access
Loan arrangement
Loan Arrangement
Pool
Availability
Borrower
Request
GCA
Desk
GCA
Borrower
Euroclear
offer
• Contact the Desk via
Bloomberg, email, or tel
► [email protected]
► [email protected]
(bloomberg e mail)
► 0032 2 326 42 20
• Send your locates or
review pool availability
Loan Confirmation
• Daily confirmation of trades
end of day
GCA
Desk
GCA
Borrower
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GCAccess
Loan settlement – A pre-paid model
Collateral
Collateral
1
Pre-collateralisation
of loan exposure
Borrower Main
Trading account
Collateral
Pledge
Pledge
Triparty
FOP
Triparty
FOP
EB Account
Lender collateral
account
Loan
2
Once collateralised
Loan generation
Loan
Settlement
Delivery FOP
Loan
Euroclear Bank
Transit account
Settlement
Delivery FOP
Lender Main
Trading account
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Loan Management
Corporate Actions
Monitoring
Monitoring of
• Corporate actions
GCA Desk
Lender Main
Account
• Income proceeds
• Automatic compensation of income proceeds,
redemptions, mandatory corporate actions
• A recall will be triggered if lenders wish to participate
in a voluntary corporate action
• Lenders to instruct a recall for meetings if they wish to elect
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Loan management
Recalls
Monitoring
Monitoring of
• Settlement
activity
GCA Desk
Lender Main
Account
• Corporate
actions
• Recalls are generated
► Upon Lender request
► When a Lender has an upcoming delivery instruction
► For certain corporate actions
• Recall periods T + 2 or T+1 (UK Gilts, US Treasuries)
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Reporting
Data
Information
Report
Frequency
Format
Channel
Collateral
and Loans
• Position
• Security information
(rating, country,
issuer type,
currency)
• Valuation
• Applicable haircut
Margin
report
Once a day
at the end
of day
CSV file
Pdf
Email
Triparty
Collateral
and
Exposure
Statement
2, 14, or 16
times per
day
MT569
SWIFT
Triweb
10 times per
day
MS access
Secured
website
Collateral
Loan
balances
and fees
• Position
• Security
identification
Statement
of holding
Once a day
at end of
day
MT535
SWIFT
• Loan balances
• Fees
Loan
balances
and fees
Optional
(daily,
weekly,
monthly)
Excel CSV
PDF
Email
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GC Access
How to get started to borrow?
• Confirm
► Your agreement to the contractual documentation
GC Access Terms and Conditions
– GC Access Operating Procedures
Your reporting options
–
►
• Agree with EB on a dedicated credit line for GC Access activity
• Agree with credit documentation
► Credit letter
►
►
►
GC Access General Conditions
GC Access Collateral Agreement
GC Access Securities Borrowing Conditions
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GC Access
How to get started to lend?
Register for the service by confirming:
• Your agreement to the contractual documentation
►
GC Access Terms and Conditions
►
GC Access Operating Procedures
• Your lender profile
• Your lending cap
• Your reporting options
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