Collateral management, independent valuation and transaction processing

Securities Services

In a rigorous context where operational challenges are increasing, market yields are under pressure, and regulations are more stringent than ever, you need to rely on a partner who can support you and bring operational efficiency, asset safety and collateral optimisation.

Since 2011, we have continuously invested in robust and scalable platforms and designed a highly modular suite of solutions – Collateral Access – covering a wide range of transactions. As a leading custodian with a complete suite of collateral management solutions, we are ideally positioned to support you and help you reduce your counterparty risks.

What sets us apart

 An end-to-end solution for over-the-counter (OTC) transactions, such as repo, OTC derivatives and securities lending

A global operating model: one collateral management team sharing one operating model; a highly automated and integrated solution

Regional presence, providing follow-the-sun coverage with local teams servicing their region

Fully compliant with the latest industry practices and regulations, leveraging expert teams, connected to industry workgroups and regulatory bodies

Unlock your potential with a global player
  • fully modular suite of solutions, with services provided on a stand-alone or bundled basis:
    • Transaction management, supporting trade processing, Central Clearing Counterparty (CCP) model , matching affirmation confirmation, events and cash flow management
    • OTC (over-the-counter) transaction valuation and analytics
    • Bilateral collateral management supporting both variation and initial margin
    • Triparty collateral management
    • Regulatory portfolio reconciliation
    • Regulatory reporting to DTCC
  • Integrated with our securities services: middle office, fund administration, custody, depobank
  • Continuous investments in technology, connectivity to all market platforms, scalability of our platforms

A full suite of solutions

Bilateral collateral management

Acting as a bilateral collateral management agent since 2011, we support asset managers, asset owners and insurance companies for any collateralised transaction worldwide: cleared and non-cleared OTC derivatives, foreign exchange, securities financing, repos, TBAs (To Be Announced) and Forward MBS (Mortgage-Backed Securities). We have designed a flexible solution that benefits from continuous upgrades to keep on being at the forefront and better assist you.

Choosing BNP Paribas as your collateral agent gives you access to:

  • An open model, interfaced with multiple custodians and tri-party agents and connected with market utilities and major valuation providers
  • A scalable infrastructure
  • Our smart allocation process that automatically selects securities to be delivered according to a waterfall of priority
  • Uncleared margin rules services supporting both variation and initial margin.
Our services to support initial margin for non-cleared derivatives:
  • Initial margin (IM) calculations under either ISDA Standard Initial Margin Method (SIMM) or table-based model leveraging our independent valuation capabilities
  • IM threshold monitoring to monitor your Credit Support Annex (CSA) exposure versus the pledger and secured party thresholds
  • Exchange of IM calls through standard market utilities, dispute management with drill-down into risk factors
  • “Account Control Agreement” custody structure leveraging our triparty capabilities for pledgors (collateral givers)
  • Controls that IMs are duly exchanged through processing and reconciliation using triparty messages (from both pledgor and pledgee positions)
Triparty collateral management

Since 2017 our triparty platform supports our clients, providing advanced technology and seamless user experience in an environment where no new player had emerged in the past 20 years.

As a leading custodian, we enable you to connect with a large community of banks, asset owners, asset managers, hedge funds and corporates. Our solution is fully integrated with the rest of the BNP Paribas ecosystem to ease the connection between collateral takers and collateral givers.

By leveraging our services, you maximize your securities financing transactions (repo, securities financing, etc…) and benefit from:

  • A highly efficient mobilisation of your assets thanks to our most recent features: simulation module, advanced algorithms.
  • Greater asset protection through asset segregation and our extensive proprietary custody network.
  • Streamlined legal framework.
  • Ability to operate collateral exchange on segregated markets at CSD level[1]
  • Increase the velocity of your collateral transfers.

Our solution makes the most of our custody locations by sourcing directly all types of collateral (fixed income, equities, cash) from your local or global custody accounts in order to mobilise collateral quickly when and where it is needed. 

Watch the video below to learn more about triparty collateral management.
  • Buy-Side
    I am an institutional investor, and I need a solid post-trade collateral management solution
  • Sell-Side
    As an investment bank, I have been coping with collateral requirements, for a while
  • Buy-side
    … I need expertise on repo, securities lending and derivatives
  • Sell-side
    … I must find new counterparties and sources of revenue…
  • Buy-side
    … I want to capitalise on emerging opportunities!
  • BNP Paribas Securities Services
    We are a world leading custodian. We simplify collateral management with our tri-party solution, and connect market players worldwide.
  • Buy-side
    I can’t afford to handle any additional post-trade tasks.
  • BNP Paribas Securities Services
    Our solution goes beyond collateral, from our agency lending programme to middle and back-office services.
  • Buy-side
    Seems fine, but what about inventory management… this is an operational nightmare!
  • BNP Paribas Securities Services
    Our tri-party service can be connected directly to your trading account, with a simple addendum to our legal framework. No need to manage a longbox anymore.
  • Sell-side
    Hang on! I need to move assets back and forth between local markets and longbox accounts, resulting in significant costs. Can you help?
  • BP2S:
    Yes. We are both a local and global custodian. We can help you source collateral directly from our own local custody franchise.
  • Buy-side
    As a portfolio manager, I need guarantees that regulatory segregation is respected. Otherwise,.. This may prevent further business development
  • Sell-side
    I am facing strong limitations as well. I can’t easily source niche liquidities on segregated and frontier markets.
  • BNP Paribas Securities Services
    Our tri-party service complies with segregation requirements, stemming from regulation, market practice or risk policies.
    We help you access liquidity pools wherever they are.
  • BNP Paribas Securities Services
    Based on our 20 years of experience in Securities Services, we designed a streamlined and competitive solution to support you in a changing world:
    Our tri-party service reduces collateral risks, costs and burden, and helps to expand your business.
Independent valuation

Valuation of OTC instruments requires strong capabilities and expertise and the independence of OTC prices is of utmost importance in highly volatile markets. We offer a comprehensive, robust and sophisticated valuation service

  • Covering a broad coverage of instruments from vanilla to exotic, cleared and non-cleared
  • Relying on recognised valuations partners to price all your portfolios in a single platform
  • With a strong control framework in order to perform deep investigation
  • Supporting both Standard Initial Margin Model (ISDA SIMM) and grid methodologies for initial margin calculation

Transaction processing and lifecycle management

Our solution encompasses post-trade processing and life cycle management services, portfolio reconciliation and reporting to trade repositories giving you access to all market platforms through a single entry point (SWIFT, TriResolve, DTCC Global Trade Repository to name a few).

What is the difference between bilateral and triparty collateral management?
  • When you buy a house with the help of a mortgage, you may have heard about “collateral”.
  • In that case, the collateral on the loan is your house.
    That means: if during the pay back, you default on your loan, the bank can sell your home to get their money back.
    In consequence, the bank needs to ensure that the collateral, your house, covers the value of the loan.
  • Let’s imagine that the house is in a good area. It can be usually sold at face value.
    Now, let’s imagine that the house is in a less desirable area. The market is less liquid and, in the future, the bank may face a loss when they will try to sell it. The bank is considering only 70% of its value. This is the haircut.
    If the house is located in a flood-prone area, it may be very hard to sell and the bank may simply not accept it as collateral. We say it is non-eligible.
  • And, there are other criteria: for instance the concentration limit. The bank needs also to avoid a concentration of its own risk: in that example, too many houses in a specific area. If a specific negative event impacts this area, the value of all houses will be impacted.
  • All these notions define what we call the eligibility matrix.
  • In our industry, financial transactions generate a counterparty risk.
    It can be mitigated by Collateral in the form of cash or securities.
    This collateral can be managed either in bilateral or in tri-party relationship.
  • In Bilateral, each counterparty has his own team or provider for their collateral operations and its own custodian. The collateral is transferred through the market, mostly in the form of cash or fixed income.
  • In Tri-party, the collateral management is outsourced to one provider: the « tri-party agent ».
    The two counterparties appoint this provider as their collateral agent and custodian.
    First, when the two counterparties agree on a transaction, they inform their tri-party agent with the loan value, in other words the exposure to be covered by collateral.
  • Second, the tri-party agent looks at what the fund already posted as collateral. In our case, it’s a new transaction, there is not yet any collateral.
  • Third, the tri-party agent checks which assets are available and eligible based on the eligibility matrix agreed by the two parties. It also takes into account upcoming corporate actions, future sales and client preferences.
  • Then, the tri-party agent transfers the collateral with a Free of Payment settlement.
    The tri-party agent can also manage re-use capabilities, when it is authorized by the two initial parties. It means that collateral received in the first transaction can be “re-used” as collateral for other transactions in the tri-party agent network.
    Then, this counterparty can reuse it with other counterpraties… who themselves reuse it.
  • Every day, the tri-party agent revalues the collateral (based on close of business day prices), updates static data of assets, and integrates new exposure to determine if collateral has to be posted or recalled.
  • During the life of the transaction, one party may want to sell the collateral they posted or corporate actions may occur. The tri-party agent has to manage “substitutions”, to recall the collateral posted and replace it with new assets.
  • If the collateral was re-used, the tri-party agent substitutes the collateral through the network.
  • Choosing one solution, Bilateral or Tri-party, depends on each client specific needs.