With the ever increasing volatility in the energy markets, effective collateral management is essential in helping to manage and contain credit risk.
Knowing your counterparty exposures and how much of that exposure is collateralised enables you to call for additional collateral in a timely manner when exposures increase. Understanding the status of call memoranda helps track down unsettled collateral in a managed workflow environment that streamlines the whole collateral function. Instead of manual and time consuming reconciliation between counterparties’ deal valuations, Brady Credit Risk’s Collateral Management module provides automatic trade reconciliation where thresholds can be placed onto any deal field. This highlights any differences that may cause disagreement on the size or even direction of the collateral call. The Collateral Management module also re-computes collateral requirements based on rating changes from the external rating agencies as they happen.
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Credit Support Annex
All the key contractual margining terms are captured and utilised for the exposure and margin call calculations. Users can capture the valuation and notification times, the eligible collateral, the core exposure calculation, thresholds, minimum transfer amounts, rounding and independent amounts. All calculations can be fixed, driven by a rating matrix or guarantee.
Automated Margin Call Process
The Collateral Management module completely automates the margin call process for both demands on counterparties and expected demands from counterparties. This is workflow driven to automate the daily calls and manage the lifecycle of a particular call from authorisation, notification, counterparty acceptance and settlement. The margin call document is automatically created in either PDF or Excel format and can be automatically faxed or emailed. Unsettled and settled collateral are computed and maintained and back-office payment notifications can be seamlessly fed into the system if required.
Disputes and Reconciliation
An advanced tool is included for handling the dispute process. Upload counterparty trade valuations in spreadsheet format and compare and reconcile in the system at specific tolerance levels. Split the difference and averaging can be employed.