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BNP Paribas turns to SWIFT messaging to help with collateral protection solution

BNP Paribas Securities Services is working with SWIFT to improve its collateral protection solutions for corporate, buy-side and sell-side clients, in-line with the new more stringent regulatory environment. The move follows an earlier link-up with Euroclear’s Collateral Highway to improve the bank’s access to liquidity.

BNP Paribas will work closely with SWIFT to integrate the body’s standardised messages into its operations, supporting tri-party collateral flows within the bank’s ‘Margin Protect’ solution, which ensures compliance with the upcoming regulatory requirements on over-the-counter (OTC) transactions, mitigation of counterparty risk, asset safety and cash reinvestment facilities. The new rules, which effectively force OTC trades back ‘on exchange’ are a result of the Pittsburgh G20 meeting back in 2009 and are designed to avoid the mess caused by the financial crash of 2008 when many trading positions could not easily be unwound and did not have enough collateral against them to prevent collapses and taxpayer-funded bailouts [for more on these issues please see the bobsguide show reports from TradeTech 2013 and FPL EMA Trading Conference -Ed].

‘Margin Protect’ from BNP Paribas will also provide straightforward and more efficient management of all securities collateral operations, claims the bank, from instruction to substitution and monitoring.

“The more stringent requirements and the expected increase in volumes of collateral exchanged will make it difficult for firms to cope with a manual process still largely reliant on fax and emails,” said Philippe Ruault, head of clearing settlement and custody products at BNP Paribas Securities Services.

“The combination of our robust and efficient custody model with SWIFT’s secure messaging services supporting collateral management will benefit clients as it ensures collateral safety through a simplified access to account control arrangements (ACA).”

Collateral protection has recently moved up the priority agenda, becoming one of the top concerns for both market players and regulators. Over 10 regulations, in particular the US Dodd-Frank Act and the European Market Infrastructure Regulation (EMIR), which incorporate the Pittsburgh G20 changes among much else, will have a direct impact on how banks manage and protect collateral; meaning clients are facing considerable challenges in terms of accessing and managing collateral efficiently.