Collateral is viewed as both a solution to and a trigger of massive financial losses that occurred as a result of the financial crisis of 2008. In response, Asian policymakers introduced new rules and legislation, such as the amendments to the Financial Instruments and Exchange Act in Japan, as well as largely pending implementations, such as the amendments to the Securities and Futures Ordinance (2014) in Hong Kong, the Securities and Futures Bill (2012) in Singapore, and the Corporations Legislation Amendment Bill (2012) in Australia, all with the primary objective of increasing market stability and resiliency, enhancing transparency and reducing counterparty, operational and liquidity risk.
These efforts complement a wide range of U.S. and European regulations such as the Dodd-Frank Act and the European Market Infrastructure Regulation (EMIR) as well as industry initiatives designed to achieve similar goals. As a result, dynamic and rapid financial market changes are impacting the management, mobilization and transformation of collateral. This paper provides an overview of collateral and collateral management, highlights key drivers for change, both global and Asia-Pacific (APAC) specific, and discusses various solutions and opportunities to respond to regulatory and industry challenges.