The growing need for collateral - A quick interview with EFAMA's Senior Policy Advisor

Written by: Fleming. Team

Vincent Dessard
Senior Regulatory Policy Advisor

1. Many reports hint at growing collateral demands and possible shortages. How big will the need for collateral get?

To give an answer is almost impossible to say as it depends on several factors:

  • the type of eligible collateral
  • the required amount
  • the capacity of the collateral giver to acquire or transform assets
  • the capacity to leverage

It is important to note that the vast majority of regulated fund and fund managers are only able to deliver collateral on their own assets without borrowing capability.

2. Are there any additional types of collateral to be potentially used (or even coming into use now)?

From a fund manager and regulated fund point of view, the more diverse, the better - in order to meet any strategic requirements. One limitation that remains stable is the need to have sufficient liquidity in the chosen type of collateral.

3. What has been the impact of CRD IV/CRR so far? Have there been any differences between how the buy-side and the sell-side have been (and will be) affected?

Funds and asset managers are not directly subject to CRD IV/CRR. The impact is only indirect, through an increase in cost that has an impact on the economics of trade.

4. In general, have financial institutions of various sizes adapted differently to the constantly evolving regulations?

All have to adapt but not all have same needs or same national regime. The evolution / adaption is surprisingly aligned on the size of the market participant, not buy- or sell-side.

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