The PRA, FCA and Bank of England are scrutinising firms procedures and policies.

This follows on from recent risk failures within Securities Finance businesses - highlighted by the collapse of Archegos in 2021.

As firms review and potentially enhance their securities finance risk management controls and oversight in collateral and margin processes, we look at how this review can be used to provide broader business benefits. 

It is widely acknowledged that having a live, centralised and global view of all trade and collateral data continues to be a challenge for many firms.  Market participants encounter numerous hurdles as they attempt to capture real-time views of data, as well as digitised schedules and to normalise and enrich that data once captured.  These challenges are exacerbated where the requirements spread across multiple instruments, asset classes and geographies.

From a risk management standpoint, this single view is however only half the battle where discrepancies between how two firms capture the same trading activity introduce significant, incremental risk.  An accurate understanding of how a counterpart views a trade or collateral position will not only help with various post-trade processes between counterparts e.g. settlement / returns / marks / margin agreement, but also provide accurate input into the associated risk management monitoring.  In short, access to real-time counterpart data and automated processing helps with efficiency and provides important MIS for counterpart risk assessment and management. 

The single, reconciled view mentioned above also provides valuable insights into a firm’s operational efficiency (highlighting issues early) and provides intraday oversight to help managers calculate and actively monitor their counterpart exposure as well as understanding how it is being managed, monitored and escalated.  Of course, there are broader business benefits too.  Minimising fails, breaks and both exposures and over collateralisation will help commercially along with minimising the impacts of regimes such as SFTR and CSDR. 

Addressing the siloed nature of collateral management processes; by products, business units and regions, along with managing the growing ’reach’ of collateralisation is an additional, key driver for firms to invest in this area; albeit one that introduces further complexity where more data still is required to achieve an effective outcome .e.g digitised legal agreements Digitisation of legal data can be leveraged in eligibility analysis and optimisation, and importantly risk management and controls processes. 

Returning finally to the topic of regulators now becoming involved in this area and applying pressure on market participants in general to, simply put, do a better job; the reality is that the benefits of resolving some of the underlying issues that have led to FCA concerns will yield far broader business benefits in the short, medium and long term.

At Pirum we’re helping firms automate and manage their front to back securities finance businesses to improve risk management and provide broader benefits – by breaking down internal silo’s and providing real-time, high quality data to drive operational efficiency along with profitability whilst managing and minimising risk through enhanced oversight and controls. 


Contact us to find out more. 



Simon Davies

Director Business Development