Pascal Morosini - CRC Triparty Repo Financing

Transcription

Clearstream’s Global Liquidity Hub
Where collateral belongs
CRC Triparty Repo Financing
Pascal Morosini
Global Head of GSF Sales & RM
Global Liquidity Hub
A history of innovation in collateral
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1979
1992
1996
1999
2001
2002
2004
2005
2006
2007
Automated Securities Lending
First triparty repo service in Europe
AutoAllocation / AutoSubstitution module
Collateral allocation to the Bundesbank
Collateral allocation to the Federal Reserve
Strategic Securities Lending
KAGplus
EuroGC Pooling
ASLplus, collateral re-use
GC Pooling International
The Global Liquidity Hub was launched in 2009
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2009
2010
2011
2012
2013
2014
Collateral allocation to the BCL
Equities and Funds as Collateral
LH GO
LH Connect
Launch of Clearstream Repurchase Conditions (CRC’s)
OTC Collateral
Triparty Repo :
‒ Launched in 1992
with major
enhancement in
2006.
‒ Served as
technical base for
the Global
Liquidity Hub.
‒ Real time
allocation and
closing.
‒ Daily margin calls
and substitutions.
‒ Clearstream as
collateral agent
performing all
transaction
administration
form A to Z.
05 May 2015
2
What are triparty repos?
Trade Details
Cash Provider
(Collateral
Receiver)
Currency
Principal
Repo (or interest) rate
Collateral set (or basket)
Trade dates (or term)
Simultaneous delivery vs payment (DVP)
(cash vs collateral)
Cash Taker
(Collateral
Giver)
Core features of a
triparty repo:
‒ Both parties
appoint a
third-party
collateral
management
agent
‒ Trade terms
agreed
bilaterally
‒ Clearstream
as triparty
agent screens
and selects
collateral
‒ Segregation of
assets into
cash provider
account
05 May 2015
3
Benefits of triparty repos
Cash
Counterparty
Collateral
Clearstream
The ‘4 Cs’ help
you to reduce
counterparty risk:
‒ Secured
investment
through use of
collateral
‒ An alternative
to other
money market
products
‒ Use of a
reputable
third-party
custodian
‒ You control
the collateral
requirements
and trade
terms
05 May 2015
4
Cash Takers
Triparty Repo – A success story
Repo volumes :
‒ Repo has shown
a constant growth
in the last years to
a significant
outstanding.
Custodian Banks
(as agent)
Commearcial Banks
Investmentbanks
Broker Dealers
2015
Cash Providers
1992
CCPs
Central Banks (Monetary Policy)
Asset Manager
Corporates
Custodian Banks
Agent Lenders
Commearcial Banks
Central Banks
(Reserve management)
1992
2015
‒ EUR 5,5 trio
(European volumes
for all repo types, dec
2014)
‒ Strong resilience
during the Lehman
crisis.
‒ Clearstream
volumes around
EUR 300 bio.
Corporate – Case study
‒ Corporates still have record cash holdings in order to remain flexible towards
business development opportunities. The crisis and the low interest rate
environment, regulatory requirements and the negative interest rates pose
immense challenges for treasurers.
‒ On the other hand the low interest rate environment gives corporates access
to cheap funding via capital markets, raising questions regarding the need for
efficient cash management.
‒ The placement of unsecured investments is increasingly difficult due to
reduced bank limits and counterparty risk.
The corporate treasurer investment tool kit
Money Market
Bonds
Deposits, Loan
Commercial Papers
Repo, Triparty, Structured Lend
Primary and 2dary market for bonds, Credit paper, Jumbos
Structured Bonds
Tailor made solutions , like single- callable, Multi-Callable, multi tranches, Switchabels, Puttables
Structured Credit
Credit Linked Notes, FtD-CLN’s
EMC, AM
… other
Direct Investments, Certificates, ETF’s, Funds,
Funds , alternative assets
Corporates with IFRS accounting are looking for investments sub three
months as it can be shown as "cash equivalent“ in their balance sheet.
Repo in focus :
‒ The traditional
treasury tool kit
offers many
instruments, but
Repo got more in
focus due to two
main reasons:
1. Security/risk
considerations
2. changed
regulations
‒ Repo does less
eat credit lines and
could pay higher
yield than a
deposit
1. Do you think corporate treasurers will keep
investing in Money Market Funds (i.e. IMMFA
funds/ “AAA”) despite potential negative
return?
a) YES, because counterparty risk remains a high priority
b) YES, because of liquidity, stable NAV and known
product
c) NO
c) YES, but less than before
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2. Do you think corporate treasurers will use
more tri-party repo’s?
a) YES, because counterparty risk remains a key issue
b) NO
c) YES but it will take a while because they need to
better understand the product and to “sell” it to their
management
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Managing the legal documentation
- A triparty repo relationship can be started using the
following five easy steps:
Legals
Baskets
Trade
- Appoint a collateral management agent
- Agree and sign legal agreements:
- Either separate bilateral terms (GMRA, MRA) and
a triparty agreement
- Or an ‘all-in-one’ document - Collateral
Management Service Agreement (CMSA) and
Clearstream Repurchase Conditions (CRC’s)
- Agree and set up your collateral eligibility criteria
- Confirm operational requirements and treasury SSIs
- Open the triparty account and trade!
05 May 2015
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How do CRC’s differ from GMRA’s?
CR
CR
CR
CG
CG
CG
GMRA
GMRA
GMRA
GMRA
GMRA
GMRA
GMRA
GMRA
CR
CR
GMRA
Clearstream Repurchase
Conditions
(CRC’s)
+
Collateral Management
Service Agreement
(CMSA)
CG
CG
CG
CR
The difference is
in the approach:
‒ GMRA’s are
individually
negotiated
between
parties
‒ GMRA’s don’t
include any
triparty repo
provisions
‒ CRC’s are
standardized
and multilateral
‒ CRC’s +
CMSA are an
‘all in one’
triparty repo
agreement
05 May 2015
11
The Clearstream Repurchase Conditions (CRC)
Main legal features / construction of the CRC :
‒ Framework agreement for repurchase transactions submitted to
Luxembourg law, notably the Luxembourg law on financial collateral
arrangements of 2005, as amended.
‒ No aggregation of transactions except for margin exposures and event of
default.
‒ Include close out netting mechanism close to GMRA principles.
‒ Referring directly to CMSA as regards to collateral eligibility, valuation,
corporate actions and substitution processes.
‒ Supported by legal opinions in several jurisdictions (FR, BE, DE, UK, CH,
IT, IR, LU, NL, ES, HK, SG, AU, AT, SE) among others on enforceability of
the CRC, validity of transfer of title, netting and set-off, impact of
insolvency proceedings, choice of law and jurisdiction.
‒ Legal opinions are available free of charge via the signature of nonreliance letters.
05 May 2015
12
The Clearstream Repurchase Conditions (CRC)
How to implement it :
1. Execute (if not yet in place) in two copies the CMSA 2013 version as
either Collateral Receiver or Giver.
2. Execute in two copies the Appendix A of the CMSA 2013 and for the
counterparties under the CRC select from the “TCM service type” drop
down menu the “TRS CRC” option.
3. Execute in two copies the Appendix E to the CMSA 2013 to confirm
transactions under the CRC.
05 May 2015
13
The Clearstream Repurchase Conditions
EXAMPLE : Collateral Receiver name = Corporate XYZ
05 May 2015
14
EXAMPLE : Collateral Receiver name = Corporate XYZ
Counterparty acceptance can also be done via SWIFT MT599 for an even faster
marriage broking.
05 May 2015
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Participation status as of 1st of April 2015:
• 42 customers have signed the CRC as Collateral Receiver or as Collateral Giver or
both.
• This includes major investment banks, private banks and corporates
• In the pipeline for Q2-Q3 2015 only :
• 20 banks
• 28 corporates – insurance/pension funds – Ministry of Finance
• Aiming for up to 65 participants by end of June 2015
• Numerous transactions under CRC have taken place since December 2013 including
now counterparty in Asia.
05 May 2015
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Summary:
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Simplified and less complex
Under Luxembourg law ( like CMSA)
15 legal opinions available including Singapore, Hong-Kong and Australia
Only for triparty repo.
The CRC does not compete with other available forms of standard market agreements
(e.g. Global Master Repurchase Agreement, GMRA) but provides a repurchase
framework for those participants willing to only start with triparty repos. If two
counterparties under the CRC are willing to extend their relationship to other forms of
repos (bilateral/classic or buy and sell back) they shall enter into a GMRA and terminate
the CRC.
05 May 2015
17
Q&A

Pascal Morosini - CRC Triparty Repo Financing

Transcription

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