BNY Mellon: Collateral Management: Navigating the Regulatory Maze

As a result of the 2008 financial crisis and resulting suite of regulatory changes, the market has been driven to recognise the significance of collateral and its value in trading and risk mitigation. This realisation has been the catalyst for collateral attracting an increased market focus, and becoming a standalone area of market expertise with some describing it as a new asset class. We believe market players may need to alter their mindset to function effectively and take advantage of the challenges and opportunities of the new collateral landscape.
To date, regulatory comment and research has been almost exclusively focussed on individual market segments. The term ‘regulatory’ in this Paper is used loosely in that it encompasses initiatives (including directives and reports) designed to influence market behaviour and in turn impact the practices employed to manage collateral. The introduction of numerous interconnected, and at times possibly conflicting, regulations has resulted in some market players employing a ‘just-in-time’ or ‘self-preservationist’ approach. The benefits of a holistic collateral view represent a call to action for everyone. Even if you are not directly impacted by regulatory change, you may still experience an indirect business threat or opportunity as a result of the behavioural change of other market players. We believe that a firm-wide regulatory perspective is essential to complying with regulatory changes and delivering tangible benefits.
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