The Collateral Infrastructures

This chapter will cover some of the major challenges for an efficient global financial system, including the mobilisation of eligible collateral across a fragmented global infrastructure and the role of global custodians. The chapter describes how the market has entered into a new collateral paradigm that requires a structured, cohesive approach both internally within financial institutions and externally across the global financial system. In keeping with the theme of this book, this chapter can be viewed through the lens of collateral and how the custodians will impact the plumbing in the future.

Introduction

The overall goal of the numerous regulatory initiatives is to make the global financial market more resilient against systemic risk. Since 2008, regulators have acknowledged the importance of collateral and, in some jurisdictions, have addressed its shortage. Regulations recognise that collateral lubrication is essential to financial plumbing and have chosen to use practical methodologies (eg, netting of repos under certain conditions), although the leverage ratio will still be a binding constraint. The primary driver has been the continued shift from non-collateralised