Northern Trust is enhancing its collateral management and liquidity solutions in order to help clients meet the requirements of implementing various regulations, such as the Dodd-Frank Act and European Market Infrastructure Regulation (EMIR).
Fiona Horsewill, head of product and strategy for Europe, Middle East and Africa at Northern Trust, said: "The intersection of these regulations will impact institutional investors in a number of ways, particularly increasing the need for liquidity and, over the longer term, creating a collateral squeeze."
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Under the Dodd-Frank and EMIR guidelines it is anticipated market participants will require greater amounts of eligible collateral and will see increased demand for liquidity. However, aspects of the Basel III regulation, and others, may limit the levels of collateral and liquidity available in the market, thereby creating challenges for investors.
Northern Trust’s solution will enable clients to hold their assets within a transparent account structure, even when being used for collateral for clearing derivative positions. Through the enhancements, clients will be able to:
- view their entire asset inventory and track each asset’s location for assets held in custody with Northern Trust and outside of Northern Trust
- access eligible collateral for initial margin requirements
- review and evaluate counterparty exposure
- monitor potential future liquidity needs
Horsewill added: "By expanding our liquidity access solutions, we can help support our clients’ short-term liquidity needs so that they are not required to liquidate assets unnecessarily in order to meet the variation margin demands. We will continue to work closely with our clients and the wider market to create solutions that will ensure access to eligible collateral through a variety of sources to meet regulatory driven collateral requirements."
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