Collateral management is undergoing rapid evolution, driven by market developments, regulations, and innovation in services and technology. This dynamic landscape was reflected in the thoughtful perspectives shared during the panel discussion at the 26th Annual European Beneficial Owners’ Securities Finance & Collateral Management Conference held in London this month. The panel included our own David Raccat, Co-Founder and CRO at Wematch.live, who provided valuable insights into the latest trends and innovations shaping the industry.

A prominent focus of the discussion was collateral optimisation strategies to maximise efficiency and minimise costs. Approaches like diversifying the range of acceptable collateral assets, proactively upgrading or downgrading collateral based on market opportunities, and leveraging sophisticated collateral management technology are growing in popularity. However, risks like reinvestment risk must also be carefully managed, potentially by limiting the tenors and risk profile of reinvestment options. 

The rising interest rate environment is significantly impacting collateral reinvestment returns and associated risks. This requires beneficial owners to reassess their reinvestment programs and adopt more conservative approaches suitable for the current volatility. At the same time, beneficial owners are also reviewing their broader collateral risk tolerances, with some looking to tighten policies due to market uncertainty, while others may strategically expand the range of acceptable collateral to pursue higher returns.

Ongoing innovation is driving evolution across collateral services, operating models, technology solutions and regulation. Structural enhancements like collateral transformation services and market utilities can drive meaningful operational efficiency improvements. New collateral types like crypto assets also create added complexity that requires clear policies, rules, and governance frameworks.

Shifting costs, pricing dynamics, and revenue opportunities in collateral management are being shaped by factors like higher volatility, increased collateral demands driven by regulation, and rules like the Basel III leverage ratio. ESG considerations are also starting to emerge in collateral management policies and practices, although adoption remains relatively limited currently compared to other areas of finance.

Collateral management continues to go through an exciting period of change, creating new opportunities but also risks to be navigated prudently. The diverse perspectives shared during the panel discussion provided important insights into the key trends and developments that collateral management participants need to track closely. As an innovator in securities financing technology, Wematch.live helps market participants optimise collateral management workflows and strategies through our sophisticated automation and analytics capabilities. Our solutions are designed to help clients unlock the full potential of their collateral assets. To learn more, reach out.

The views and opinions expressed are for informational and educational purposes only as of the time of the writing/production and may change at any time. The material may contain “forward-looking” information that is not purely historical in nature. Such information may include, among other things, projections, forecasts, estimates of market returns, and proposed or expected portfolio composition. All information has been obtained from sources believed to be reliable, but its accuracy is not guaranteed. There is no representation or warranty as to the current accuracy, reliability or completeness of, nor liability for, decisions based on such information and it should not be relied on as such.