In March ISLA welcomed nearly 100 market participants to London for our first ISLA Connects Educational Briefing of 2025.
Kindly hosted by BlackRock, the evening session explored all things collateral, from what it is, its differing asset classes and how different market participants utilise collateral to help achieve their commercial objectives.
Delegates received a detailed view of the role of collateral in a transaction under the GMSLA as well as the different collateral structures utilised in the market; what collateral means for different parties from lender to borrower and tri-party agent; as well as a view of how collateral is utilised in other markets such as the money market which is integral to the efficient operation of the global financial markets.
Key takeaways:
- While fundamentally focussed on risk management, collateral management evolved over time and has adapted to the economic changes, regulatory developments and the evolution of technology.
- Collateral asset classes have evolved over time – originally cash was favoured but now high-quality fixed income and liquid equities are also widely used. Looking to the future, tokenisation offers the potential for further diversification.
- Given the ever-increasing complexity of collateral management, we could see an increase in the use of tri-party structures and/or CCP to help manage the operational burden.
- Market participants are exploring AI’s potential future role in collateral management, such as for collateral reconciliation.
- Previous crisis including the 2020 ‘Dash for Cash’ and the 2022 Gilt Market Crisis have shown that firms with proficient collateral practices and processes will be able to navigate distressed markets easier -which is especially vital to maintaining liquidity in the market.
Following the event, delegates joined for a structured networking session, providing the opportunity for guests to connect, and build new networks which are fundamental to the future of our industry.
This was just the first of many ISLA Connects events planned for 2025, click here to fund out more about the ISLA Connects brand and how you can get involved.
