Citi Launches Regulatory Initial Margin Calculation Service to Help Clients Comply With Uncleared Margin Rules
November 12 2019 - 8:30AM
Business Wire
Initiative Builds on Citi’s Extensive
Investment in its Collateral Platform
Citi has launched a Regulatory Initial Margin Calculation
Service, a solution for buy-side firms required to post initial
margin under the Uncleared Margin Rules (UMR). Financial
institutions such as asset managers, pension funds and insurance
companies are scheduled to come into scope of the regulations based
on volume thresholds that take effect on September 1 of 2020 (known
as Phase 5) and 2021 (Phase 6). In order to comply with the
regulations, many firms that didn’t have to post initial margin
before will have to establish new collateral management
capabilities, including the ability to calculate initial
margin.
Citi’s Regulatory Initial Margin Calculation Service helps firms
as they progress from needing to estimate their future initial
margin levels before the deadlines, to monitoring initial margin
levels once the thresholds take effect, to operating full daily
initial margin calculation and reconciliation. The service
leverages the ISDA SIMM™ model made possible through a partnership
with AcadiaSoft, an industry collaborative, focused on margin
automation and collateral management.
“There are several key questions that in-scope firms need to
address,” said Diana Shapiro, North America Head of Collateral
Management Services. “When will they need to start posting
collateral, how much collateral will be required, and how can they
optimize collateral and mitigate the cost of compliance? An early
and accurate view of the likely initial margin levels will enable
clients to plan the scope and scale of work needed to comply with
the regulations.”
Citi’s service offers ad hoc estimation, for which no set-up is
required, or periodic initial margin calculation based on a
regularly supplied trade file. The initial margin calculation can
be applied to existing portfolios or to hypothetical portfolios for
the purposes of simulating initial margin under different
scenarios.
“As firms come into scope of UMR under phases 5 and 6, the
additional margin obligations could strain their operational
platforms, drain liquidity from their portfolios and increase
collateral drag,” said Fergus Pery, Global Head of Collateral
Management Services. “The role of collateral management here goes
beyond just another regulatory readiness exercise. We see this as
an opportunity to help our clients understand the growing impact of
collateral management on investment performance and to create value
by implementing sound practices today.”
This service builds on Citi’s investment in its collateral
management platform over the past 18 months, which includes the
migration to a fully cloud-based architecture to enable greater
scalability and faster time to market for new capabilities. Citi is
also developing a collateral analytics solution to help clients
optimize funding costs and has a full front to back Regulatory
Initial Margin offering that includes both Collateral and Custodial
services.
Citi, the leading global bank, has approximately 200 million
customer accounts and does business in more than 160 countries and
jurisdictions. Citi provides consumers, corporations, governments
and institutions with a broad range of financial products and
services, including consumer banking and credit, corporate and
investment banking, securities brokerage, transaction services, and
wealth management.
Additional information may be found at http://www.citigroup.com
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