The two firms have signed a letter of intent with the aim of offering Norwegian market participants to use collateral to cover domestic exposures. Norway is the first Scandinavian market to sign up to Clearstream’s global collateral management model.
“The regulatory agenda requires banks and financial institutions to better manage their capital and liquidity buffers. An efficient local and global collateral management service will become a must going forward,” said Stefan Lepp, member of the executive board and head of global securities financing at Clearstream.
VPS would offer collateral management services on a white-labelled basis through Clearstream’s collateral management hub. Assets remain on accounts in the local market environment, which avoids creating new systemic risks and helps to meet regulatory requirements in many domestic markets globally.
John-Arne Haugerud, CEO at VPS, said: “From a risk perspective, it was particularly important that the underlying assets do not leave the Norwegian jurisdiction and this is guaranteed under the Liquidity Hub GO service. The Global Liquidity Hub offers more than a domestic solution and we will explore this potential along our journey with Clearstream.”
The firms said that the partnership would help Norwegian financial institutions and VPS customers to overcome internal collateral fragmentation across systems.
Collateral management is becoming an increasingly important topic amid fears over a potential shortage of collateral.
A 2011 report by Accenture revealed that financial services could collectively save more than €4bn each year by addressing operational collateral management inefficiencies: decentralised operations and unaligned business objectives are limiting the ability of banks to manage collateral efficiently on a local and global basis.