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New research reveals gap between collateral managers and IT decision makers

First Published 28th September 2017

SIX Securities Services research reveals the different opinions between IT decision makers and collateral experts on key issues

London - An industry wide European study from SIX Securities Services has revealed the differing opinions between IT decision makers and collateral experts on a range of key issues. This split is most evident when it comes to views on the availability of high-quality liquid assets (HQLA).

The vast majority (83%) of collateral respondents think that there is a shortfall while only 47% of IT decision makers agreed. 63% of collateral respondents went as far as to say that there is a significant shortfall, while only 17% of IT respondents hold this view. The discrepancy between the two is more apparent within sell-side organisations where there is a 47% difference on the issue compared to a 17% difference in buy-side organisations.

Differing opinions between the two areas of specialisation also extend to views on the quality of collateral. 53% of IT decision makers believe that it is acceptable for collateral to be low quality, complex and opaque so long as it is cheap, whereas only 30% of collateral respondents have this view.

In reverse, almost two thirds (60%) of collateral heads believe that collateral must be simple, high quality, liquid and easy to value. Only 13% of IT respondents agree that it needs to be simple while 33% believe that the cost of collateral is 'the only thing that matters'. While collateral specialists are likely to have a deeper understanding as to the requirements of collateral, the level of disparity between the two is cause for industry concern, particularly in terms of future challenges.

Despite over half (53%) saying it is acceptable for collateral to be low quality, IT decision makers think that the biggest collateral optimisation challenge for the future is in fact low quality collateral (57%). The biggest concern for collateral heads (70%), however, is that with the cost of lending and borrowing increasing, it will make the cost of collateralising OTC trades too expensive to make the trading activity viable.