Dear,
A couple of weeks ago, the EU General Court in Luxembourg ruled that the European Central Bank lacks legal powers to dictate the location of the clearing of euro-denominated trades.
http://www.bloomberg.com/news/articles/2015-03-04/u-k-defeats-ecb-in-clash-over-city-of-london-s-clearinghouses
The decision concerns the ECB’s policy requiring clearinghouses handling euro-denominated trades to be located in the 19-nation currency bloc, a proposal that would have threaten London’s position as Financial Capital of Europe.
Clearing houses play a very important role in the Financial System; they’re the financial institutions that provide clearing and settlement services for financial and commodities derivatives and securities transactions. They act as third parties to all futures and options contracts; as a buyer to every clearing member seller and a seller to every clearing member buyer.
This responsibility comes with a lot of power for the clearing houses in the capital allocation processes; by facilitating some transactions in front of others, clearing houses have the capacity of influencing the international flows of Capital.
A couple of years ago, in the middle of the Euro crisis, you could read the following post about the power of the clearing houses in the new model.
http://blogs.sap.com/banking/2012/07/04/the-role-of-the-clearing-houses-in-a-liquidity-crisis/
In the old model of Capital abundance, efficient Capital management was not a priority for the clearing houses. In general, and with little exceptions, financial agents decided to believe that the chances of a clearing house becoming insolvent were zero. An interesting exception to this rule was the Black Monday of 1987 when freezing capital markets were close to pull down several clearing houses with catastrophic consequences for the financial system and the whole economy.
Former US Federal Reserve chairman Ben Bernanke, is one of the greatest experts in the 1987 crash and he’s well aware of the weaknesses of the Financial System and the critical role that the Clearing Houses are going to play in the new environment of Capital scarcity. Just four years ago, he gave the following speech.
http://www.federalreserve.gov/newsevents/speech/bernanke20110404a.htm
The SAP banking business suite provides two components for supporting the functions and responsibilities of the Clearing Houses and other Clearing Partners in new Financial System that will emerge from the Financial Crisis.
- Payment Engine.- Which helps banks and other financial institutions to determine the most efficient route in their Capital allocation flows.
- Bank Analyzer with its Integrated Financial and Risk Architecture, which supports the efficient management of Capital in the financial institutions (including Clearing Houses).
But overall, SAP Banking provides integrated capabilities that will support integrated scenarios for improving capital efficiency on the management of capital flows.
Today, when a bank determines the preferred route for Capital transfers, it follows “static” routes looking at traditional parameters like “Fees” or “Service Level Agreements”.
As we move deeper into the financial crisis, selecting one route in front of other will require considering the capital costs of the alternative routes.
This will open the gate to new scenarios in Capital Optimization, at the end efficient capital management is not just a requirement for banks, but the most critical activity of the whole financial system.
Looking forward to read your opinions.
Join the SAP Banking Group at: http://www.linkedin.com/e/gis/92860
K. Regards,
Ferran.
A couple of weeks ago, the EU General Court in Luxembourg ruled that the European Central Bank lacks legal powers to dictate the location of the clearing of euro-denominated trades.
http://www.bloomberg.com/news/articles/2015-03-04/u-k-defeats-ecb-in-clash-over-city-of-london-s-clearinghouses
The decision concerns the ECB’s policy requiring clearinghouses handling euro-denominated trades to be located in the 19-nation currency bloc, a proposal that would have threaten London’s position as Financial Capital of Europe.
Clearing houses play a very important role in the Financial System; they’re the financial institutions that provide clearing and settlement services for financial and commodities derivatives and securities transactions. They act as third parties to all futures and options contracts; as a buyer to every clearing member seller and a seller to every clearing member buyer.
This responsibility comes with a lot of power for the clearing houses in the capital allocation processes; by facilitating some transactions in front of others, clearing houses have the capacity of influencing the international flows of Capital.
A couple of years ago, in the middle of the Euro crisis, you could read the following post about the power of the clearing houses in the new model.
http://blogs.sap.com/banking/2012/07/04/the-role-of-the-clearing-houses-in-a-liquidity-crisis/
In the old model of Capital abundance, efficient Capital management was not a priority for the clearing houses. In general, and with little exceptions, financial agents decided to believe that the chances of a clearing house becoming insolvent were zero. An interesting exception to this rule was the Black Monday of 1987 when freezing capital markets were close to pull down several clearing houses with catastrophic consequences for the financial system and the whole economy.
Former US Federal Reserve chairman Ben Bernanke, is one of the greatest experts in the 1987 crash and he’s well aware of the weaknesses of the Financial System and the critical role that the Clearing Houses are going to play in the new environment of Capital scarcity. Just four years ago, he gave the following speech.
http://www.federalreserve.gov/newsevents/speech/bernanke20110404a.htm
The SAP banking business suite provides two components for supporting the functions and responsibilities of the Clearing Houses and other Clearing Partners in new Financial System that will emerge from the Financial Crisis.
- Payment Engine.- Which helps banks and other financial institutions to determine the most efficient route in their Capital allocation flows.
- Bank Analyzer with its Integrated Financial and Risk Architecture, which supports the efficient management of Capital in the financial institutions (including Clearing Houses).
But overall, SAP Banking provides integrated capabilities that will support integrated scenarios for improving capital efficiency on the management of capital flows.
Today, when a bank determines the preferred route for Capital transfers, it follows “static” routes looking at traditional parameters like “Fees” or “Service Level Agreements”.
As we move deeper into the financial crisis, selecting one route in front of other will require considering the capital costs of the alternative routes.
This will open the gate to new scenarios in Capital Optimization, at the end efficient capital management is not just a requirement for banks, but the most critical activity of the whole financial system.
Looking forward to read your opinions.
Join the SAP Banking Group at: http://www.linkedin.com/e/gis/92860
K. Regards,
Ferran.
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