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British industry says Dodd-Frank not likely to reduce systemic risk

David FieldFifty percent of market participants surveyed at a recent industry debate said that OTC clearing reform would not reduce systemic risk, according to new research conducted by Rule Financial and Calypso.

Seventy-nine percent, however, reported the need for collateral optimization within their organizations due to new regulatory changes.

"It is clear that the effectiveness of new OTC clearing reforms and the final set of rules that will come into effect are still open to debate,” David Field, the executive director of Rule Financial, said. “However, there is a general consensus across the investment banking community of the need to have an enterprise-wide view of collateral to ensure regulatory compliance and match collateral availability to obligations triggered by centralized clearing."

British banks that are spending between £25-30 million a year on collateral management infrastructure will not only be well prepared for the new regulatory changes but will also be in a position to profit from them, Field said.

David Little, the director of strategy and business development for securities finance and collateral management at Calypso, said that the opportunity for market participants to profit from new assets coming through the door is limited.

With 38 percent of survey respondents saying they have not yet decided about what type of collateral optimization software they might use, they are rapidly losing time to capitalize on the new collateral requirements, Little said.

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