We are proud to announce that we have successfully supported the trading of secured deposits in collaboration with the innovative fintech Consort1, along with Clearstream, Standard Chartered Bank, NatWest, Alpha Group, and BankClarity, with Gloucestershire County Council being among the first UK local authorities to utilise the new service.
Thanks to this collaboration, the wholesale repurchase agreement (repo) market can now be accessed by local authorities, corporates, fund managers, and other institutions who have not had access in the past.
This is a significant milestone in the financial industry, as it provides more opportunities for institutions such as local authorities to diversify their investment portfolios, lower the risk profile of cash deposits, continue to work with mainstream banks across the usual tenors, and potentially earn higher returns on their cash.
Secured deposits offer many benefits, one of which is the cash deposit can be fully collateralised with government bonds, corporate bonds, or other securities to mitigate the financial risk of a bank failure. This means, even if the bank were to fail, the cash lender’s funds would be secured by the collateral held securely with Clearstream for the depositor. Additionally, lenders of cash can potentially earn higher returns than with unsecured cash deposits, due to the liquidity benefits provided to banks that can support the collateralisation of deposits.
Providing access to the repo market by removing all the usual barriers to entry, our partner Consort1 is the coordinator and facilitator of this service having implemented tri-party trading contracts on behalf of clients to allow for a simple cash deposit placed with the client’s chosen bank to be fully collateralised for the duration of the deposit.
David Green, Director of Arlingclose stated; “We are delighted to have successfully launched the secured deposit service for local authorities alongside our industry partners. Our clients have over £10 billion of public money invested, so it is a significant advance that they can now substantially lower the credit risk on their bank deposits without conceding the return, flexibility or administrative simplicity they are used to.”
Justin Clapham, Co-founder and CEO of Consort1, stated: “We are proud and truly honoured to be working with Arlingclose to bring the repo and collateralised secured deposit service to local authorities that have not been able to access this before. Along with our global partners, we are thrilled to be at the forefront of this innovation in the financial industry.”