Estimated $27 billion exposure from collateral settlement failure on sell-side
A collateral joint venture and consultancy
giant Pricewaterhouse Coopers (PwC) have published a paper on
the cost of collateral settlement fails, suggesting the annual
exposure due to collateral settlement failure for sell-side
firms is as much as $27 billion.
The report from the DTCC-Euroclear
GlobalCollateral and PwC said the total cost of collateral
failings could be as much as $27bn for banks and brokers, while
the cost of remedying these fails is set to increase
dramatically for all firms.
By 2020, the paper argues, the average
annual operational cost of remedying bilateral over-the-counter
derivatives collateral settlement fails could rise 407% to $3.6
million for each buy-side firm and 377% to $2.4 million for
each sell-side firm. This will result in an increase of full
time employees: from four to 24 employees in 2020 for buy-side
firms and from three to 16 employees for sell-side firms during
the same period.
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