Collateral

optimization
Capabilities that drive
financial resource
efficiency
 Executive summary
With costly increases in financial resource requirements When FIs embark on collateral and funding optimization
following regulatory reform, intensified margin initiatives, it is critical for them to view profit and loss (PnL)
pressures and volatility driven by the COVID-19 from an opportunity cost lens across their obligations at the
pandemic, collateral optimization presents a significant enterprise level. This is a shift from the traditional desk-
opportunity to drive greater efficiency. In a revenue- level cost of carry PnL; however, this is the most effective
constrained environment, financial institutions (FIs) methodology to not only identify and quantify optimization
have an essential need to make informed decisions to opportunities but also understand the capabilities and
maximize profitability while remaining compliant with investment required to realize opportunities and measure
regulatory requirements. performance.

With this objective in mind, FIs are investing in data The return on investment (ROI) can be very attractive
and infrastructure enhancements that will position for high-priority, short-term opportunities with a 10x
them for long-term growth and profitability. More annual payback achievable — the so-called “low-hanging
specifically, they are developing capabilities to manage fruit.” The opportunity cost methodology can help FIs to
and prioritize the source and use of collateral across clearly identify and quantify opportunities, understand the
the following areas: liquidity buffer reserves, regulatory underlying driver of the inefficiency and develop a portfolio
lockups, margin requirements, prefunding obligations of short-, medium- and longer-term initiatives to reduce
and maximizing internalization. inefficiencies in their collateral and funding portfolio.
Leading FIs leverage investments in regulatory initiatives
Many of the opportunities discussed in this paper to support the realization of optimization objectives with
are applicable to both buy- and sell-side institutional marginal additional investment. This mix of opportunities
market participants. Based on Ernst & Young LLP’s helps FIs to achieve quick wins and self-fund longer-term
experience in supporting these types of initiatives, initiatives.
opportunity exists to drive $150m+ funding cost
optimization for large global sell-side organizations The identification and quantification of the opportunities
annually; $75m+ for smaller global and regional provide the transparency and incentive for financial
sell-side organizations and the largest global buy-side institutions to act.
organizations; and $25m+ for other institutional buy-
side firms.

The opportunity cost methodology can

help FIs to clearly identify and quantify
opportunities, understand the underlying
driver of the inefficiency and develop a
portfolio of short-, medium- and longer-term
initiatives to reduce inefficiencies in their
collateral and funding portfolio.

2 | Collateral optimization: capabilities that drive financial resource efficiency

 What needs to be optimized
FIs have several financial resource constraints in need of optimization, with the binding constraints varying by firm.
There is a broad set of levers to optimize the consumption of these resources. Collateral management, in its broadest
definition, is a high-value set of levers that FIs can optimize to drive significant benefits.

Buy-side and sell-side firms are subject to similar financial resource constraints, the optimization of which is a complex
puzzle. FIs need to juggle competing demands across their organizations for collateral to effectively optimize these
constraints. Many FIs currently managing their financial resources in silos by business, region and/or function have the
greatest opportunity to optimize their collateral supply and demand by refocusing their thinking to an enterprise level.

Financial resource constraints

Funding availability and cost Leverage

Capital and risk-weighted assets (RWA) Regulatory lockups

Liquidity and high-quality liquid assets (HQLA)

(liquidity coverage ratio (LCR), net stable Internalization
funding ratio (NSFR), internal stress testing)

Data accuracy and timeliness

Collateral optimization inefficiency is observed in and driven by two primary areas: the requirement (the amount to be
funded) and the pledge (how the requirement is met).

The requirement The pledge

FIs should look to optimize the channels through which FIs should then turn their attention to optimize the
they execute on a pre- and post-trade basis to enable collateral delivered to satisfy their requirements. FIs have
decision-making on new trades in the context of the requirements spanning from margin calls (initial margin
broader portfolio to reduce overall financial resource (IM) and variation margin (VM)), prefunding and guarantee
consequences. Opportunities exist to optimize the fund requirements at financial market utilities, regulatory
requirement by enhancing capabilities at the enterprise leverage and lockup requirements (15c3-3, FCM, 40 Act,
level in determining the trade type, market and trading etc.), secured funding and securities lending activity,
counterparty that is most efficient. This capability enables and internal segregated accounts to satisfy capital and
FIs to consider the initial margin (IM) impact, carry cost, liquidity obligations (LCR, HQLA, etc.). FIs that build
X-value adjustment counterparty considerations, impact teams and infrastructure to view and optimize across
to prefunding requirements, and the broader liquidity a broad scope of these requirements can achieve the
and capital impact when determining the appropriate greatest economic benefits, increase internalization and
execution strategy. For the buy side, this would include reduce liquidity drag.
opportunities to benefit from cross-margin offerings from
dealers and prime brokers in reducing the net margin
requirement to be posted.

Historically, FIs have considered these requirements and the appropriate pledge in isolation by product, desk, geography
or other constraint. FIs should consider taking a more centralized and real-time approach by considering collateral
supply and demand, and the appropriate management of resources at the enterprise level. Optimizing larger pools of
collateral and requirements can achieve greater portfolio efficiency and cost savings.

Collateral optimization: capabilities that drive financial resource efficiency | 3

 Drivers of inefficiency
Factors such as limited transparency and operational, infrastructure and organizational constraints are major drivers of
optimization inefficiencies. An effective collateral optimization program needs to identify inefficiencies in PnL form and
develop a deep understanding of the drivers. Without developing a detailed understanding of why the inefficiency exists,
FIs fail to sustainably realize benefits.

Transparency constraint
The transparency constraint can be attributed to a firm’s legacy approach to collateral management. Many FIs manage
collateral across multiple groups separated by product or desk using inconsistent data and infrastructure. These siloed
teams are left to develop their own toolkit to optimize solely the collateral within their remit.

Siloed collateral management analytics

Siloed collateral management functions and the resulting fragmented infrastructure limit the ability to view available
inventory, requirements and eligibility at the enterprise level. Many FIs have upward of 10 organizations responsible
for managing collateral and meeting funding requirements. Many of these groups lack basic analytics to identify
overcollateralization or inefficient collateralization, and they do not have the operational capability to remedy identified
issues.

While FIs have invested in individual businesses and desks, there has been a lack of investment in building centralized
analytics and data capabilities at the enterprise level to identify opportunities across siloed functions. As a result, there
is limited capability and significant fragmentation in the optimization decision process across the organization.

An effective collateral optimization program

needs to identify inefficiencies in PnL form
and develop a deep understanding of the
drivers. Without developing a detailed
understanding of why the inefficiency exists,
FIs fail to sustainably realize benefits.

Collateral optimization: capabilities that drive financial resource efficiency | 4

Operational and infrastructure constraints
Operational and infrastructure constraints have been observed that limit a firm’s ability to mobilize collateral and
execute on identified opportunities. In addition, several market structure frictions hinder the ability to optimize (e.g.,
settlement timing conventions). Infrastructure constraints that limit collateral mobility, such as settlement and post-
trade operational processes (e.g., corporate actions), need to be minimized and should be a focus of targeted firmwide
investment.

Siloed settlement and post-trade infrastructure Manual allocation decisions

Historically, financial institutions have developed FIs have upward of 10 functional teams managing and
settlement and post-trade infrastructure that is specific optimizing collateral and funding. Many groups lack
for a particular asset class, business, desk or market. the systemic capability to select and execute collateral
As a result, the optimal position for specific collateral allocations, relying on “offline” or manual processes.
usage may lack the infrastructure and operational For these groups, collateral allocation decisions are
capability to be traded, processed or managed by the made manually, with incomplete information and focus
business or region with the demand. on operational expediency over financial optimization.
These manual allocations result in missed optimization
Fragmented structure opportunities of significant economic value and in many
cases result in significant overcollateralization.
FIs with a highly fragmented depo and nostro structure
often have a higher cost and complexity in their Given the complexity of the optimization challenges across
settlement and reconciliation process, undermining many competing factors, FIs that leverage optimization
their ability to efficiently mobilize collateral. For many engines or algorithms to make and execute the allocation
FIs, this fragmented structure is driven by a business decision have a significantly greater level of efficiency
architecture that is perceived to be efficient by allowing over FIs that have manual processes. The objective of FIs
each desk and subdesk to have its own physical account should be to create the data and infrastructure ecosystem
structure. that facilitates an optimization algorithm to automatically
manage the allocation of collateral to meet the
Market structure frictions
requirements. The most effective algorithmic solutions can
There are industry and market structure frictions such inventory and store all relevant frictions and constraints
as market open times, settlement cycles, client lockups across the enterprise and can be flexibly adjusted to
and regulatory controls that can limit a firm’s ability to prioritize multiple constraining factors to recommend the
optimize. It is important for FIs to differentiate between optimal decision based on the FI’s collateral inventory and
true market structure frictions and internal frictions, overall requirements.
such as timing lags and constraints to mobilize
At the industry level, the use of the triparty model
collateral across desks, regions and entities. These
as a mechanism for collateralizing requirements will
frictions should be inventoried and leveraged to assist
also enhance efficiency and remove many operational
in the quantification of the opportunity cost PnL and in
constraints. FIs on both the buy side and the sell side
understanding where an opportunity can be realized by
should explore the expanded adoption of the triparty
eliminating or mitigating the friction.
model and use it across a broader set of obligations.

The objective of FIs should be to create

the data and infrastructure ecosystem
that facilitates an optimization algorithm
to automatically manage the allocation of
collateral to meet the requirements.

5 | Collateral optimization: capabilities that drive financial resource efficiency

Organizational constraints
To achieve optimization, management across business lines needs to agree to the program’s objectives and understand
the goal of optimizing for the enterprise. Migrating to an enterprise view requires the individual teams to redesign
legacy processes and coordinate across functions. Mobilization of a cross-functional enterprise program requires a shift
in mindset, but the new way of thinking will support FIs in achieving significant economic benefits.

Cultural barriers Lack of incentive

At many FIs, the siloed businesses and supporting From an operational perspective, many individual
operations functions lead to a culture of optimizing teams struggle to adjust from their legacy processes
their desk constraint as opposed to optimizing for the or operationalize new technologies. Similarly, where
enterprise. There are also difficulties scaling existing operations teams are manually allocating collateral, there
optimization processes from a desk to an enterprise may be limited incentive to change their methods. It is
level, as the constraints and data sets differ. important for leadership to agree to program strategy
and effectively communicate the purpose and benefits of
Varying definitions of optimal enterprise optimization.
With the disparate ownership across organizations, The use of the opportunity cost PnL to identify
some FIs have differing levels of focus on delivering enterprise-level inefficiency is a critical first step in
optimal collateral and varying definitions of what sustainably overcoming the siloed culture and mentality.
optimal collateral means. In some parts of organizations, The approach not only enables the identification of
there is a lack of appreciation for the need to optimize, internalization opportunities but also creates ongoing
differing levels of what is optimal, and competing binding transparency for leadership to support the shift in
constraints across desks. In some cases, the definition organizational structure and incentivize greater
has been focused on operationally expedient delivery of collaboration and communication across desks.
collateral over economic factors.
While it is important that the operational cost and
feasibility be embedded in the optimization decision,
it is equally important that the financial resource
impact be weighed heavily against this to determine
the overall optimal position. Building a consistent view
of optimal collateral through clear incentives, such as
transfer pricing methodology, can significantly uplift the
understanding of the teams and encourage the optimal
allocation.

Given the constraints, building an opportunity cost

PnL and embedding it into the daily reporting provide
insights and incentives for teams to aim for greater
efficiency. Once a process is developed that is sustainable
for the PnL, the uplift to create an algorithmic view of
the optimal allocation recommendation is relatively
straightforward, although it must include the market
structure and operational frictions to be of value. Leading
FIs have embedded such solutions into the process to
automatically allocate collateral and remove the human
decision-making process.

Collateral optimization: capabilities that drive financial resource efficiency | 6

 Capabilities to enable optimization
Informed by our work with buy- and sell-side FIs, we show in the figure below the relative maturity of FIs’ collateral
optimization capabilities across the industry. While not all FIs need to have a leading suite of capabilities to achieve
optimization, the capabilities highlighted as “Foundational” and “Operational” are the primary areas for investment.
The capabilities that are flagged as “Advanced” are differentiating for FIs with complex multi-asset-class portfolios.

Based on this benchmarking methodology, we invite you to self-score your organization to determine your FI’s
capabilities. Based on our experience, only a few FIs are truly meeting the leading-class capabilities but generally have
been able to achieve significant efficiency when measured using the Opportunity Cost PnL methodology.

Collateral optimization capabilities benchmarking

Optimization capability Lagging Industry benchmarking Leading Lagging Industry observations Leading

Digitized collateral Collateral agreements across all obligation types Digitized eligibility and client/operational
eligibility not available in a digitized format constraints data across all obligation types
Foundational capability

Enterprise inventory Fragmented inventory reporting by entity, Centralized collateral inventory view across the
management business line and asset class enterprise on near real time

Centralized collateral requirements view across

Collateral funding Fragmented requirements reporting by entity,
the enterprise on near real time as requirements
requirements business line and asset class
are agreed, adjusted or created

Granular pricing model charging based on true

Fund transfer pricing Static pricing model leads to inability to price
profile of trade book and funding costs
true profile of trade book
(normalized funding cost)

Opportunity cost PnL Cost of carry PnL siloed by desk; limited only to Opportunity cost PnL covering all collateral and
trading desks funding obligations

Enterprise-wide system to forecast impacts to

Collateral forecasting Siloed forecasting capability by business line,
Advanced capability

collateral portfolio and funding needs; includes

usually limited to contingent liability
pre-trading what-if analysis

Optimization algorithm Manual identification and selection of collateral; Algorithmic identification and recommendation
leverage triparty agent engine for tri-repo of collateral to meet obligations

Algorithm-driven Allocation engine automating decision-making

Manual allocation and booking of collateral to
across asset classes and entities with automated
allocation obligations
booking and substitution process

Consolidated and virtual depo and nostro

Depo and Nostro
Operational capability

Fragmented depo and nostro structures by desk,

structure to streamline mobilization across desks
rationalization business and entity
and products

Settlement Siloed and fragmented settlement infrastructure Single enterprise-wide settlement infrastructure
infrastructure and workflows by business line, entity and region that supports mobilization of assets globally

Asset servicing and Fragmented, manual and non-flexible Comprehensive infrastructure able to process
corporate actions infrastructure limiting volumes corporate actions across all asset types

Industry average Range of peers

Collateral optimization: capabilities that drive financial resource efficiency | 7

Foundational capabilities
Foundational capabilities form the groundwork for effective collateral optimization at the enterprise level. The data
strategy and structure that FIs adopt to facilitate the consolidated enterprise view are essential investments. FIs can
leverage initiatives such as collateral asset traceability, contract digitization and stress testing/forecasting as a baseline
for enabling optimization capabilities. FIs should see these capabilities as entry-level requirements to achieve collateral
optimization.

Inventory management Eligibility

FIs should maintain a consolidated view of enterprise- FIs should have at the enterprise level a consolidated view
wide collateral and cash inventory, otherwise known into contractual, regulatory or operational eligibility for
as collateral sources and uses. Although an end-of-day all requirements to identify optimal collateral fill. Having
consolidated inventory view is the baseline capability, the additional ability to overlay contractual rights with
FIs should ideally work toward near real-time analytics operational constraints on an asset class level enhances
at the enterprise level with clear asset traceability, to the ability to operationalize this data.
understand the availability of collateral and liquidity at
multiple points throughout the day. Developing a trader Funding cost and funds transfer pricing
platform with a view of collateral used consistently across
Assigning a cost of funding to all assets based on funding
product and entities to help manage inventory, shorts
market prices and the firm’s secured or unsecured funding
coverage and secured funding activity will provide FIs
costs is a necessary capability. Consideration of each
with a holistic picture of the available inventory.
asset’s funding cost will inform optimal allocation and
Requirements measure the cheapest to deliver assets.

An enterprise-wide consolidated view helps FIs view Opportunity cost PnL

all collateral and funding requirements across the
In order to determine the inefficiency in the collateral
organization. FIs should also include an operational flag
portfolio, FIs should have the ability to combine the base
as to who owns the requirement operationally and a
capabilities at an enterprise level. FIs with the ability to
risk flag to identify if this is a volatile or relatively stable
layer in the root cause behind the inefficiencies can derive
need. Leveraging firm stress testing to support this
a plan to adjust the management approach and associated
information adds further strength to the capability.
infrastructure to realize the optimization goal.

8 | Collateral optimization: capabilities that drive financial resource efficiency

Advanced capabilities
The advanced capabilities are those that FIs can leverage to drive greater optimization, which enable FIs to sustainably
achieve optimization of their collateral and funding portfolio on an ongoing basis.

What-if modeling and forecasting capability Algorithm-driven allocation

FIs should be able to project the collateral need and An FIs ability to embed the algorithmic allocation
perform what-if analysis on trading activity to determine (e.g., linear program, Monte Carlo) directly into daily
the optimal venue and counterparty for trade or portfolio processes can help reduce the human element for the
of trades. Leading FIs have the capability to analyze broadest set of requirements to that of an exception
both pre-trade (e.g., best execution) and post-trade (e.g., management and trade execution role. Such an engine
compression) analysis. Forecasting capabilities of leading can assist FIs in facilitating optimization of the portfolio
FIs extend to both intraday and end-of-day capabilities on a near real-time and continuous basis.
considering market frictions, internal frictions and
intraday and multiday funding flows to identify available
collateral and liquidity at multiple points during the day.

Optimization algorithm

An optimization algorithm helps FIs conduct a point-in-

time review of the collateral posted against requirements,
considering the constraints, and receive suggested
substitutions and actions to drive greater efficiency
into the portfolio. This type of tool can be used ad hoc
to identify opportunities and has the flexibility to adjust
constraints such as pure PnL vs. balance sheet impacts at
both month-end and quarter-end.

Collateral optimization: capabilities that drive financial resource efficiency | 9

Operational capabilities
Operational capabilities are focused areas where FIs tend to have frictions in their ability to optimize collateral due to
their operational and technological structure. FIs tend to have infrastructures focused on specific asset classes, entities
and regions. Targeted investments create a more open and flexible architecture and enable FIs to maximize the realized
benefits from optimization. Adoption of a global triparty model to support pledging and movement of collateral is an
opportunity the industry should pursue as a mechanism to drive operationally efficient collateral optimization.

Depo and nostro rationalization Asset servicing and corporate actions

FIs should streamline their depo and nostro structure to Similar to the settlement infrastructure challenge, FIs
enable more efficient mobilization of collateral across tend to have a corporate actions infrastructure that is
desks, entities and regions; FIs that have a “virtual” product-, entity- or region-specific, resulting in specific
structure have greater ease in mobilizing and avoid securities requiring manual support and undermining the
the operational burden and cost of internal collateral ability to optimize in a sustainable manner. FIs should
movements. Such capability reduces the need for make targeted investments to develop corporate action
carrying excess liquidity, limits the complexity of intraday asset class-agnostic infrastructure.
management and significantly reduces operational cost.

Settlement infrastructure

FIs can invest in simplification of their cash and securities

settlement infrastructure to achieve a product, entity
and region-agnostic model. While it is desirable to
have a single global asset class-agnostic settlement
and post-trade infrastructure, this is not required to
achieve mobilization across desks, businesses, entities
or geographies. Targeted standardization by asset
classes and entity can be made to maximize ROI where
FIs do not today have a single standardized settlement
infrastructure. This is also a critical enabler of managing
intraday liquidity needs proactively.

We advocate that FIs perform an assessment of these capabilities aligned with their opportunity cost PnL analysis. This
can help FIs to attribute the collateral portfolio inefficiencies at a constraint level and quantify the opportunities by
capability. FIs can use this method to develop their strategic road map, prioritizing short-term opportunities, requiring
little to no investment.

10 | Collateral optimization: capabilities that drive financial resource efficiency

 Operating model considerations
In addition to the infrastructure capabilities required to achieve optimization, the organizational operating model is a
vital consideration. FIs need to be aligned in their optimization objectives at the enterprise level. Failing to establish the
appropriate operating model can impede an FI’s ability to fully realize optimization opportunities, even with significant
investment in infrastructure.

FIs need to consider how they will govern the collateral optimization efforts of the firm. Various models have been
observed; however, the most common and effective are detailed below. Regardless of the model that is selected, it is
imperative that the team has strong alignment, communication and common incentives.

Centralized Hybrid

A centralized model provides a consolidated function A hybrid or partnership model, with co-ownership between
integrating all financing desk activities across lines of trading desks and treasury, can help FIs establish the
business and treasury into a single unit, with a dedicated strategic objectives and develop the required supporting
framework to provide front-office, back-office and technology and operating framework.
technology support.

Federated

A federated model can help FIs establish a cross-

functional committee to set the strategic direction of the
program, with execution occurring within functions.

When considering the appropriate operating model, FIs should consider their organizational structure in context of
ownership and resource alignment with trading (equities, FICC, XVA, etc.), treasury and operations all playing a key
role. While treasury does not need to be the functional owner, it should have a strong voice due to its role in defining
funds transfer pricing (FTP) and steering incentives. FIs also need to determine if the optimization function will be
a cost or revenue center, as this alters how the function is viewed across the enterprise and informs how the FTP
structure is applied.

Technology and infrastructure considerations

FIs need to determine if they are going to leverage For the buy side, in addition to the technology platform
existing infrastructure or explore new platforms to enable vendors providing trade and life cycle services, there has
their optimization capabilities in addition to considering been a rise in asset servicers providing optimization as
the technology resource alignment. FIs can leverage a service. Such servicers are structuring their analytics
the significant investments that have been made in data capabilities, collateral administration services, agency
and infrastructure from regulatory and other business securities financing and custody solutions to provide
initiatives related to collateral and liquidity to accelerate a comprehensive offering and positioning buy-side FIs
their optimization. FIs have also used a mix of vendor to maximize alpha potential through their collateral
technology platforms coupled with existing internal optimization and financing solutions, thus minimizing
capabilities. There is a growing set of technology vendors the investments needed by the buy side to realize
in the market that offer the foundational capabilities and optimization benefits.
some with scalable advanced capabilities. Many FIs have
found success through a hybrid model of leveraging a mix
of internal technology and data capabilities, partnering
with the strat/quant teams, and connecting to vendor
technology offerings.

Collateral optimization: capabilities that drive financial resource efficiency | 11

Across a broad set of FIs, it has How to accelerate
been demonstrated that investment
in collateral optimization has
realizing optimization
a significant and rapid annuity goals
payback. Many FIs realize
FIs should review and leverage data and technology
annual ROI in excess of 10x the investments being made across collateral and liquidity
investment, and typically 40% of the initiatives, many of which will form a base for more
opportunities are realized within advanced optimization capabilities. As part of this review,
FIs should review both regulatory and business-driven
the first year, enabling same-year initiatives across regions, desks and products to identify
payback. This allows investment in commonalities in features, function and capability.
Through such a review, FIs can identify efficiencies
the advanced capabilities to be self- in investment that can streamline the build efforts,
funded through near-term savings. support building infrastructure that is consistent at the
enterprise level and ultimately accelerate the realization
of optimization goals.

Regulatory initiatives such as Reg YY, resolution planning,

uncleared margin, transition to interbank offered rate
(IBOR), qualified financial contract (QFC) and resiliency
form the core building blocks upon which many FIs have
expanded with limited marginal investment to achieve
baseline optimization objectives. Additionally, navigating
the complex technology landscape can be a challenge.
FIs that formulate a technology and data strategy that
leverage a mix of internal build and external partnerships
tend to achieve both rapid and outsized gains relative to
their peers.

Across a broad set of FIs, it has been demonstrated that

investment in collateral optimization has a significant
and rapid annuity payback. Many FIs realize annual ROI
in excess of 10x the investment, and typically 40% of the
opportunities are realized within the first year, enabling
same-year payback. This allows investment in the
advanced capabilities to be self-funded through near-term
savings.

Collateral optimization: capabilities that drive financial resource efficiency | 12

 A final word
Collateral optimization is far from a new phenomenon. The focus on optimization has picked up traction with increased
revenue pressure as funding spreads widened, growing the need to drive efficiency across the business. FIs have
become increasingly more sophisticated in how they manage optimization; however, wide variance still exists across FIs’
capabilities and success.

FIs on both the sell and buy side have the opportunity to achieve significant efficiency and alpha generation through
optimization of the collateral portfolio. During this time of revenue and margin pressure, FIs should invest in realizing
such efficiencies.

Ernst & Young LLP’s tried and tested playbook to help FIs identify and realize collateral optimization benefits can help
FIs accelerate, justify, realize and track their successes:

Develop an enterprise-wide opportunity-cost PnL to

1 identify areas of inefficiency

Define the enterprise binding constraint to inform

2 your optimization objective

Leverage the analysis to drill in and identify the

3 root cause of inefficiency

Develop a capability gap assessment aligned to the

4 opportunity-cost PnL to assist in prioritization of
opportunities

Investigate and size investment needs to build

5 a prioritized road map and business case for
investment in enhancing capability

Given the potential opportunity size that we have identified in

excess of $150m+ annually in funding cost for the largest FIs
coupled with the ability to drive liquidity, capital and RWA benefits,
collateral optimization remains an area in which FIs on both the buy
side and sell side should be focusing investment.

13 | Collateral optimization: capabilities that drive financial resource efficiency

Ernst & Young LLP contacts

Contributions by

Mark Nichols John Boyle

Senior Manager Principal

[email protected] [email protected]

Erica Becker Lisa Maus

Senior Manager Principal
[email protected] [email protected]

Jimmy Ryan
Manager
[email protected]

Collateral optimization: capabilities that drive financial resource efficiency | 14

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