CACEIS provides collateral management for OTC derivatives and securities lending operations in UCITS funds, under new ESMA guidelines

New guidelines published by ESMA bring increased operational complexity for UCITS fund management companies. Accordingly, CACEIS offers services designed to simplify the process of complying with the guidelines for UCITS management companies.

To fulfil ESMA’s new collateral requirements, CACEIS provides daily valuations on OTC derivatives, securities on lend and assets pledged as collateral, also making margin call calculations. CACEIS also monitors compliance with the new risk diversification ratios, both by issuer and by counterparty. For OTC derivatives, CACEIS’s new service takes into account the forthcoming regulatory measures of EMIR (which require initial then variation margin call calculations).

As for cash collateral, CACEIS segregates, in the fund’s accounts, the securities originating from management activities that are eligible to lend, and those originating from the reinvestment of collateral. The latter, under the new guidelines, can no longer be reused. CACEIS’s trading room also offers collateral reinvestment and transformation services that comply with ESMA’s new requirements.

Laurent Durdilly, CACEIS Products and Solutions Director stated, “Regulators are placing collateral at the heart of the effort to rebuild confidence in the financial system following the 2008 crisis. However, systematic use of collateral and the more demanding requirements on its quality and liquidity mean that it is in increasingly short supply. CACEIS anticipated these changes and has honed its collateral management expertise, taking into account not only current and future regulations but also requirements concerning the optimisation of collateral usage.”

Context
On 18 December 2012, ESMA (European Securities and Markets Authority) published a set of guidelines for UCITS fund management companies. These guidelines will come into force for new funds on 18 February 2013, while existing funds will have one year to comply with the new requirements.

About CACEIS
CACEIS is the asset servicing banking group of Crédit Agricole dedicated to institutional and corporate clients. Through offices across Europe, North America and Asia, CACEIS offers a broad range of services covering depositary and custody, fund administration, middle office outsourcing, derivatives clearing, forex, securities lending, fund distribution support and issuer services. With assets under custody of €2.5 trillion and assets under administration of €1.3 trillion, CACEIS is one of the world market leaders in asset servicing and the largest depositary bank and the premier fund administrator in Europe (figures to 31 December 2012).