Demand for collateral management on the rise: J.P. Morgan appointed by four leading super funds
Apr 02, 2012
Sydney – Australian and New Zealand institutions are looking to implement enhanced collateral management arrangements as more stringent financial regulation is implemented globally and concerns around counterparty credit risk remain at the forefront – according to global industry leader J.P. Morgan.
In light of these trends, J.P. Morgan Worldwide Securities Services (WSS) today announced it has been appointed to provide end-to-end third party derivatives collateral management for four of the region’s leading superannuation funds: AustralianSuper (AU$42bn in assets under management), New Zealand Superannuation Fund (NZ$18bn in assets under management), Government Superannuation Fund Authority (NZ$3bn in assets under management) and National Provident Fund (NZ$$1.8bn in assets under management).
J.P. Morgan WSS runs a world-leading global collateral management platform with more than US$600bn in collateral balances. The platform is also supported locally to service the large and sophisticated Australian and New Zealand markets, as well as other key Asian markets.
Commenting on the appointments, Blair Harrison, Head of Collateral Management, Asia Pacific, J.P. Morgan Worldwide Securities Services, said large investors understood that using an independent agent to administer the collateral process and hold collateral assets was the most efficient solution, both in mitigating operational and counterparty risk, and in managing costs.
“Recent volatility and counterparty defaults have reinforced the need for timely and appropriate collateralisation of counterparty exposures for superannuation funds and asset managers. We are seeing these investors place greater emphasis on the quality of the collateral as well as the need to diligently and constantly value and administer the collateral involved in a transaction,” Mr. Harrison said.
Mr. Harrison said key attributes supporting J.P. Morgan’s appointment included its ability to offer the industry’s first full service solution for the daily management of collateral obligations; a global collateral management team of 82 people providing round the clock, round the globe support; and its demonstrated industry leadership, particularly in light of emerging regulations.
New regulations, such as Dodd-Frank in the U.S. and Europe’s EMIR, which will take effect in 2012, are expected to have a profound impact on the OTC derivatives market globally. For Australian and New Zealand participants this will mean that they will need to navigate new regulations and infrastructure for the markets that they participate in.
“As a major player in both the cash management and securities servicing markets and as an expert collateral agent, J.P. Morgan has drawn on its unique position to work closely with industry participants and regulatory bodies to understand the relevant new regulations, assess the holistic impact of the changes and devise effective client solutions,” Mr. Harrison said.
“We will continue to play a leadership role and act as our clients’ advocate as regulations are being shaped. We are committed to working with our clients around the world, educating them on new obligations and continuously evolving our services to help large investors dynamically manage collateral against the changing regulatory landscape,” he concluded.