CACEIS to help UCTIS fund managers with ESMA compliance
25 February 2013 Paris
Image: Shutterstock
Cr茅dit Agricole asset servicing banking group CACEIS has honed its collateral management services for UCITS fund managers in the wake of the European 网爆吃瓜 and Markets Authority鈥檚 (ESMA鈥檚) consolidated guidelines on exchange-traded funds (ETFs) and other UCITS issues and repo and reverse repo agreements
ESMA published the guidelines in July and November 2012 respectively. It released the official translations on 18 December, giving national authorities two months to confirm whether they will comply.
The new guidelines include collateral requirements that CACEIS will fulfill with daily valuations on OTC derivatives, securities on lend and assets pledged as collateral, as well as making margin call calculations.
The firm also monitors compliance with the new risk diversification ratios, both by issuer and by counterparty. For OTC derivatives, CACEIS鈥檚 new service takes into account the forthcoming regulatory measures of the European Market Infrastructure Regulation, which requires initial then variation margin call calculations.
For cash collateral, CACEIS segregates, in the fund鈥檚 accounts, the securities originating from management activities that are eligible to lend, and those originating from the reinvestment of collateral.
鈥淭he latter, under the new guidelines, can no longer be reused. CACEIS鈥檚 trading room also offers collateral reinvestment and transformation services that comply with ESMA鈥檚 new requirements,鈥� explained a statement from the firm.
Laurent Durdilly, products and solutions director at CACEIS, said: 鈥淩egulators 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.鈥�
鈥淐ACEIS 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.鈥�
ESMA鈥檚 consolidated guidelines include other notable requirements. The repo and reverse repo guidelines say that UCITS funds should be able to recall assets that are subject to repo arrangements at any time, while those that are engaged in reverse repo should be able to recall the full amount of cash at any time on either an accrued or mark-to-market basis.
ESMA originally proposed allowing a proportion of assets 鈥渢o be non-recallable at any time at the initiative of the UCITS鈥�, and then only assets in overnight repo and reverse repo arrangements would be recallable at any time.
Its guidelines apply to all fixed-term repo and reverse repo agreements that do not exceed seven days.
ESMA鈥檚 guidelines on ETFs and other UCITS caused confusion when they were published, leading some commentators to believe that under the guidelines all revenue that is earned from securities lending would have to be returned to a UCITS fund and its investors.
An ESMA spokesperson confirmed that all net revenue must be returned, but this does not include the cost of running a securities lending programme.
ESMA published the guidelines in July and November 2012 respectively. It released the official translations on 18 December, giving national authorities two months to confirm whether they will comply.
The new guidelines include collateral requirements that CACEIS will fulfill with daily valuations on OTC derivatives, securities on lend and assets pledged as collateral, as well as making margin call calculations.
The firm also monitors compliance with the new risk diversification ratios, both by issuer and by counterparty. For OTC derivatives, CACEIS鈥檚 new service takes into account the forthcoming regulatory measures of the European Market Infrastructure Regulation, which requires initial then variation margin call calculations.
For cash collateral, CACEIS segregates, in the fund鈥檚 accounts, the securities originating from management activities that are eligible to lend, and those originating from the reinvestment of collateral.
鈥淭he latter, under the new guidelines, can no longer be reused. CACEIS鈥檚 trading room also offers collateral reinvestment and transformation services that comply with ESMA鈥檚 new requirements,鈥� explained a statement from the firm.
Laurent Durdilly, products and solutions director at CACEIS, said: 鈥淩egulators 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.鈥�
鈥淐ACEIS 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.鈥�
ESMA鈥檚 consolidated guidelines include other notable requirements. The repo and reverse repo guidelines say that UCITS funds should be able to recall assets that are subject to repo arrangements at any time, while those that are engaged in reverse repo should be able to recall the full amount of cash at any time on either an accrued or mark-to-market basis.
ESMA originally proposed allowing a proportion of assets 鈥渢o be non-recallable at any time at the initiative of the UCITS鈥�, and then only assets in overnight repo and reverse repo arrangements would be recallable at any time.
Its guidelines apply to all fixed-term repo and reverse repo agreements that do not exceed seven days.
ESMA鈥檚 guidelines on ETFs and other UCITS caused confusion when they were published, leading some commentators to believe that under the guidelines all revenue that is earned from securities lending would have to be returned to a UCITS fund and its investors.
An ESMA spokesperson confirmed that all net revenue must be returned, but this does not include the cost of running a securities lending programme.
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