Collateral Agreement & Discrepancy Resolution

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Status: Under Review, Last Updated: 09/03/2021

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Collateral or Exposure Management disputes between lender and borrower are typically caused by loan or collateral pricing differences, an unrecognised position or a settlement exception. In the event of such a dispute, both parties should take equal ownership and commit to proactive investigation and communication intraday.

It is recommended that vendor platforms that identify contract/collateral compare exceptions should be assessed as a priority, to rule out 'aged' exceptions as a cause of discrepancy.

• New Loan activity should be carefully reviewed and pre-matched.

• Loan Return settlement activity should be carefully reconciled.

• Any exceptions should be bilaterally flagged for urgent review.

If the dispute remains unresolved, and where vendor platforms are not available, both parties should produce and compare an intraday report of data that presents:

• All open/pending loan positions for the specific 'loan book' inclusive of current price utilized and margin level applied.

• All settled collateral positions held for the specific 'loan book' inclusive of current price utilized.

• A clear exposure calculation based on loan value inclusive of margin vs. collateral value held.
  Any exceptions should be bilaterally flagged for urgent review.

It is the responsibility of both parties to escalate unresolved disputes according to internal intraday and end-of-day procedures.

If the dispute results in the lender believing that they are exposed and short of collateral then new loan activity is at risk and may be withheld or subject to cancellation. Impacted or at risk loans should be clearly communicated to the borrower. (IBP-195)