IBS Journal May 2015
SocGen gears up for collateral management rush with Tempo outsource solution
In response to impending regulations, Société Générale (SocGen) has launched a collateral management outsource solution for buy-side and sell-side market partici- pants. Branded as Tempo, it builds on the bank’s existing solutions from its securities services and multi-asset prime brokerage businesses. Clément Phelipeau, product manager for derivatives and collateral man- agement services, says there was already a ‘robust offering’ for OTC derivatives, with this now broadened for other asset classes, and with features added for managing asset pools and optimising allocations. Collateral management is clearly an
area of focus for a lot of the market and SocGen’s service is aimed at traditional and alternative asset managers, institutional investors, banks and major corporates. Not surprisingly, this area is also firmly on the radar of SocGen’s competitors, including BNP Paribas Securities Services. ‘Asset managers, asset owners, corpo-
rates, FIs, like banks, have to define their funding strategies to minimise the impact of the funding costs and the impact on the balance sheet,’ says Phelipeau. This requires a robust collateral management platform and infrastructure, he says, and other changes including new processes for clearing derivatives, proper internal recon- ciliations processes, the ability to monitor all collateral pools and to manage a large increase in daily collateral movements. With Tempo, clients can outsource all
of their collateral operations for centralised management across asset classes and coun- terparties. ‘To reduce the financing cost, which is key, there needs to be this central collateral management,’ says Phelipeau. The solution includes central margining, for dai- ly margin call calculations, notifications and collateral substitutions, and dispute man- agement for transaction processing and counterparty discrepancy. This is not only a technical challenge
but also an organisational one, as most buy-side and sell-side organisations cur- rently manage collateral in asset-based siloes. Buy-side participants in particular are currently often fairly manual in this space, with over-reliance on Excel spreadsheets, which creates a lot of operational risk, says
Phelipeau. ‘This will not be enough to cope with the new environment.’ He also emphasises a couple of other
challenges. Efficient collateral management needs robust data management and access to various data types, including static data, market data, allocation constraints (eligibil- ity rules, CSA data and so on). These types of data have to be sourced and synchro- nised in the collateral management pro- cess. Moreover, access to real-time supply and demand data is essential for efficient collateral allocation. Collateral optimisation also requires considerable calculation pow- er based on sophisticated engines capable of computing all possible allocation sce- narios. And for strong collateral manage- ment, automated reports are also essential to monitor related risks (credit, settlement, funding and operational risks). Phelipeau believes that leveraging the
expertise of an external provider reduces significant implementation and running costs, including those associated with the complexity of connecting to market infra- structures, counterparties, data providers and others, as well as those related to keep- ing in line with future regulations. There are a lot of discussions with existing and potential new customers,
Clément Phelipeau, SocGen
adds Phelipeau, and larger institutions are embarking on RFP-based selections. Firms on both the buy-side and sell-side are start- ing to design their strategies, he says, and SocGen is sharing its views with the market on what is needed, with a series of events. It has held these in Italy, Luxembourg and the UK of late. ‘Collateral management is complex, so I think it is the right time now for them to define their strategies and to prepare for next year’s regulations.’
IN BRIEF
Following a lengthy selection process with a number of stops and starts, Ethiopia’s banking newcomer, Debub Global Bank, has settled on Oracle FSS’s Flexcube core banking system. The bank has also signed for a number of other Oracle products, including Sparc T5-2 server and Storagetek storage solutions. Oracle says it will help the bank to deploy its ‘anywhere any branch’ strategy. The implementation has been completed in a four-month timeframe. The work
was carried out by the vendor’s consulting services arm and BFSI Software Consult- ing, Oracle’s India-based integration partner. The next step will be to deploy the inter- net banking functionality, as the country’s regulator has recently introduced a new framework for the services. It is understood that Oracle’s software will be used for e-banking at Debub Global Bank. The bank received its banking licence in 2012, and was known to be in the mar-
ket since then looking for a core banking platform. In the meantime, it had been run- ning a local solution, Softbank. The search attracted interest from the heavyweights including Oracle FSS and Temenos, plus a host of regional vendors such as Delta Informatique (now part of Sopra Banking Software), Neptune Software and Infra- soft Technologies. A year later, however, the bank was still looking, with Temenos, Infrasoft and Oracle FSS making it to the shortlist.
© IBS Intelligence 2015
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