PwC

1. Point of view
2. Why firms are concerned
3. Key issues & opportunities
4. Industry environment
5. Likely regulatory response
6. Suggested approach
7. Case studies
8. Summary
9. Appendix
10. PwC contacts
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Collateral Management • Challenges & Opportunities

The recent turmoil in the credit markets has highlighted significant errors and shortfalls in CM operations. These errors have translated into material actual losses and sizable additional exposure which is under-reported to management, hence undermining the risk management benefits of collateral management.
Significant operational challenges persist
Although the role of collateral is straightforward, the volume, diversity and complexity of collateralized transactions have surpassed the scalability and flexibility of processes, people and technology that support the function.
Credit and operational risks are significant
Besides the direct impact of increased counterparty default exposure, underperforming CM functions may also cause or mask significant hidden risks such as portfolio concentration, flawed credit and customer data, and substandard or missing legal documentation
– creating potentially dangerous latent exposures.
The benefits of technology advances and the adoption of industry standards have been limited
Bullish statements from Industry groups such as ISDA may over-state the degree to which derivatives-related CM operational issues have been reduced or eliminated by technology, e.g., the adoption of uniform confirmation and call practices. Our experience confirms that some large banks continue to experience high exception rates and difficulty processing collateral calls in a timely manner, and that root-cause remediation of these on-going challenges is difficult and costly.
Many banks’ CM functions have not sufficiently evolved to support complex OTC derivatives
A primary cause of substandard CM performance may lie in the historically low-profile role this cross-departmental function played in most investment banks, prior to the widespread use of complex OTC derivatives. The function may have been designed to support activities such as FX forwards and vanilla repos, where collateral movements were straightforward, products were simple, and there was a relatively small and static base of well-known customers.
Management’s attention was distracted during market expansion
The boom market for OTC derivatives and credit risk transfer products from 2000-2007 saw dramatic revenue growth and constant competitive pressures to deliver innovative products and to increase leverage for hedge fund clients. This may have distracted management’s attention from the growing insufficiency of
CM resources and operating models to service the rapidly increasing counterparty exposure.
PricewaterhouseCoopers 2 Collateral Management • Challenges & Opportunities

CM operations are challenged to keep pace with product volume and diversity growth
Faced with myriad new and different derivative transactions and a continuous flow of new hedge fund counterparties, CM organizations and IT systems proved unable to change and scale quickly enough to keep up with marketplace demands. This has resulted in backlogs of tasks and doc umentation, significant data quality issues, and bottom line underperformance and unwanted counterparty default exposure, in the form of insufficiently called and/or ineligible collateral.
Recent market events have led to greater management scrutiny of operational practices
The credit crunch and market turmoil which began in 2007 have cast a harsh light on the requirement to measure, manage and mitigate counterparty exposure, particularly with respect to highly leveraged counterparties and/or less liquid underlying reference securities. Many financial services firms are aggressively seeking to remedy previous oversights and rapidly mitigate excess counterparty exposure – and to get better management intelligence on all credit risks.
Regulatory focus is inevitable
Regulators are aware of the operational weaknesses in collateralized derivative transactions and are likely to scrutinize these functions closely during financial soundness examinations – or on a targeted basis, if a major default event occurs.
Sustainable operation model changes will bring benefits
A focus on end-to-end data management and data quality assurance – not only fixing errors in the current CM data environment, but equally importantly, developing sustainable changes to the operating model to maintain data integrity moving forward
– can offer significant benefits as banks seek to overhaul and transform their CM operations.
Scalability and adaptability are key in responding to the complexity of collateralized transactions
Longer term, firms that participate in large volumes of collateralized transactions are seeking to restructure their CM operating models
– including people, processes, enabling IT systems and data management practices
– to achieve scalability and adaptability appropriate to the elevated complexity of collateralized transactions in today’s capital markets. At the same time, firms are beginning to assess the need for more disciplined new product approval processes in order to make better informed decisions about the total lifecycle costs to support the exotic derivative or credit risk product du jou r, instead of assuming ‘all new products are good new products.’
Bottom Line: Often the risk is not apparent until it’s too late to react (e.g., the counterparty has defaulted). Strong risk managers are placing the spotlight on their CM operations to ensure they are adequately protected and to prevent further actual dollars being lost.
PricewaterhouseCoopers 3 Collateral Management • Challenges & Opportunities

Why firms are concerned
Collateral management effectively reduced credit losses during the Asia, Russia and Hedge Fund
‘crisis’ in 1997/98.
1998
Market characteristics at that time:
• International Swaps and Derivatives
Association (ISDA) estimated $200bn collateral assets
• High thresholds linked to credit worthiness
• Calendar driven MTM margin calls – straightforward calculations
• Weekly/monthly margin frequency
• Single product margining
• Standard ISDA/Global Master Repo
Agreement contract terms
• Collateral types: cash, govt bonds
The complexity of unraveling the complex web of trades in a crisis today would be unprecedented and may have been one of the prompts for government intervention in the market recently.
2008
Market characteristics currently:
• ISDA estimates >$1 trillion in collateral assets
• Wide range of CP creditworthiness and thresholds
• Market driven margin calls – complex formulas
• Daily/intra-day margin calls
• Portfolio margining
• Client driven contract terms
• Collateral securities include corporate bonds, equities
Sources: ISDA, PwC research
PricewaterhouseCoopers 4 Collateral Management • Challenges & Opportunities

Why firms are concerned
• Explosive growth of derivative volumes, cheap funding and upward biased asset prices drove a period where core risk mitigation received less focus than revenue and market share growth.
• In such a climate, front office focused on product innovation and market share – there was minimal incentive to follow a disciplined new product approval and rollout process which would have better assured that support functions like CM could accommodate structures and meet volume expectations.
• Key data like collateral agreement terms & conditions and trade upfront amounts have been captured incorrectly, late, or not at all.
• Automation and straight through processing (STP) tools for CM and associated trade types are not as mature as those for cash trade processing and most firms choose to build in-house tools which may lack technical flexibility and may become overly dependent upon the key personnel who support and maintain them.
Growth of value of estimated collateral 2000 to 2007
1400
1200
1000
800
600
400
200
0
2000 2001 2002 2003
Year
2004 2005 2006
Source: ISDA Margin Survey 2007
2007
PricewaterhouseCoopers 5
Average reported monthly deal volume 2005 to 2007
20000
18000
16000
14000
12000
10000
8000
6000
4000
2000
0
2005 2006
Year
Source: ISDA Operations Survey 2007
2007
Collateral Management • Challenges & Opportunities

Why firms are concerned
Dimension Then (FX, repos, IRS were dominant collateralized transactions)
Margin Calculations • Vanilla – Single product margining
• Mature, standardized affirmation, comparison and settlement process
• Single product margining
Data Management • Narrow range of asset types on handful of front office systems
• Relatively simple data management
•
Limited Dependencies
Portfolio Risk
Management
Customer Experience
•
•
Collateral was cash and short duration
•
•
•
Hedged products were largely cash/FX based government debt
Consistent experience
Low employee turnover
Infrequent customer/broker relationship changes
Now (Complex OTC derivatives dominant; larger volumes of all collateralized transactions)
• Complex – portfolio margining
• Non Standard – Model/market driven
• Portfolio margining/cross margining
• Upstream Dependencies – capture of nonstandard terms
• Product innovation has led to multiple asset types on wide range of front office systems
• Multiple agreement types
• Front office modification of standard T’s & C’s
• Rapid, unbounded product diversification
•
Cross border activity
• Wide range of security types, quality and maturities accepted as collateral
• Inconsistent experience – high staff turnover
•
Staff skill level exceeded in some areas
• Inadequate training given complexity of products
• Constant flow of new clients
PricewaterhouseCoopers 6 Collateral Management • Challenges & Opportunities

Why firms are concerned
Missing
Agreements
Inefficient processes
Set up legal framework
People: Training, Standardization, Quality Assurance
Standardize process
Establish or clarify data ownership
Technology: Efficient document management and indexing
Trades not
Timely captured
Initiate the transaction
Front office system rationalization and >99% day one capture Eliminate IT bottlenecks which inhibit timely upfront calls
Upfronts not called
Settle the collateral
Performance metrics and real-time risk management
Leverage industry tools, messaging protocols (FpML) and settlement utilities
Poor upstream data =
Inaccurate margin calcs
Manage collateral (margin calls, reconciliation, substitutions, etc.)
Improved STP technology
– designed to support the business objectives end-to-end
Collateral not returned by deadline on closed transactions = poor client experience
Close the transaction
Sources: SWIFT, PwC
PricewaterhouseCoopers 7 Collateral Management • Challenges & Opportunities

Why firms are concerned
Credit system
(CSA, ISDA)
Incomplete trade data causing inaccurate portfolio margin calculations

Inaccurately captured terms, conditions, thresholds, currencies,
MTAs, collateral types etc
Credit
Legal
Legal documentation system (CSA,
ISDA)
Trade input systems
(numerous, inconsistent and not fungible)
Trades not timely input
Trade terms not captured
Upfront amounts never calculated

Trade Whse
Trade data warehouse

Corrections of trades incorrectly routed
Collateral
Management
System
CMS
Untimely, inaccurate collateral requests
Improper netting
Other collateral systems for Prime Brokerage, Private Clients…

Cash Manager
–
Routes cash movements to payments system
Cash
Manager
Settlement
Trade settlement system
PricewaterhouseCoopers 8 Collateral Management • Challenges & Opportunities

Key issues & opportunities
Key Issue Impact
Poorly controlled and/or inconsistently executed customer on-boarding/ legal/credit processes
Document management and indexing systems lack required flexibility to capture all relevant T’s &C’s;
Contract amendments not consistently captured in terms database
Changes negotiated to ISDA boilerplate language/non-standard variances to terms and parameters agreed
Incomplete/inconsistent deal data flow to collateral management systems on Trade Date
Significant number of missing, outdated, incomplete, or legally ineffective documents
Incorrect downstream calculations leading to inaccurate collateral calls
Unnecessary process complexity to handle rare and/or marginally useful variances to standardized contracts
Upfront calls not timely issued; incorrect portfolio netting calculations
Upfronts and MTMs not properly valued, leading to under-margined exposure
Excess counterparty default risk
Lack of visibility on actual risk of aggregate collateral pool, e.g. by asset class, rating, issuer
Inconsistent customer experiences due to information quality and staff training issues
Potentially unmanaged market and portfolio exposure if undue concentrations exist
Poor client service, reputational risk
Opportunity
Conduct a fast track, risk based remediation effort to inventory and resolve discrepancies
Re-align people, processes and technology resources to properly support the business going forward – a fancy document management solution won’t solve core process issues by itself
Streamline document workflow and reduce number of routinely allowed changes
Get control over trade data flow; establish and use daily metrics to monitor process integrity
Improve upstream data processes to drive accurate margin and collateral calls; identify and remedy shortfalls
Monitor and manage these types of exposure to reduce risk
Restructure customer –facing CM roles and functions to improve quality and consistency
PricewaterhouseCoopers 9 Collateral Management • Challenges & Opportunities

Industry Environment
Dimension
Consistent and accurate terms & conditions data across multiple functional groups (e.g., Front
Office, Legal, Credit, and Middle Office)
Accurate and timely independent price verification of collateral
Timely collection of collateral including margin calls and upfronts
Time required to react to credit events and counterparty deterioration
Monitoring and regulatory reporting capabilities
Collection of collateral types appropriate to counterparty and market risks being secured
Global Investment Bank A Global Prime Broker B
Poor
– 100% error rate, dozens of agreement templates, data quality not managed
Fewer standard forms , management limits non-standard language
Mainly manual – some stale prices and marks
Widely variable by product type
Slow
– multiple days
Significant gaps in all relevant data sets = inaccurate reports/metrics
Aware of issue, some manual reviews
Some automation
Medium
Typically next business day
End-of-day batch process, fewer data issues
Global Investment Bank C
Proactive limits on non-standard language changes Sole source database with clear owner
Use of automated price feeds
Consistent and measured
Same day
Near real time margin calculation abilities
Estimated annual technology spend in CM area
Client Satisfaction Rating
>$5M
Poor
Passive monitoring of correlation matching issues
$3-$5M
Medium
Daily analysis of acceptable collateral types, prompt corrective action
>$15M
Good
– Excellent
A firm that is effective at collateral management is a firm which has the ability to match its risk objectives with the amount and type of collateral it pledges and receives.
PricewaterhouseCoopers 10 Collateral Management • Challenges & Opportunities

• Financial Regulators are aware of the systemic risks presented by weak operational processes and practices:
Immature state of OTC derivatives processing and collateral management processes industry-wide cited in US Treasury Dept report to President Bush as a key risk and area for attention (March 2008)
We have strong indications that all risk management and operational functions are going to receive increased scrutiny in the current environment
Regulators are beginning to show interest in operational issues and how they impact the market/credit risk of an entity
Special examinations, including operational processes, are likely to increase at top tier banks in 2Q08 and 3Q08, and we recommend clients be prepared
PricewaterhouseCoopers 11 Collateral Management • Challenges & Opportunities

3 – 12 months
Remediation & Tactical Fixes
9 – 18 months
Strategic Solution
Scoping & Diagnosis
Data Clean-up
& Remediation
Process Analysis Process Re-Design Implementation
Continuous
Improvement
People
Process
Technology
Data
• Establish Policy
Board, Steering
Committee and
Working Groups
• Agree on resourcing approach
• Confirm project scope
• Develop project plan and define workstreams
• Develop workstream project charters
• Confirm support required from technology teams
• Define initial data quality queries
• Review existing documentation on data sources and reconciliations
• Confirm data sources and data population
• Deploy data remediation and project management resources
• Develop data remediation metrics and progress reporting
• Interpret and assess results and determine remediation priorities
• Remediate collateral positions
• Refine/tailor diagnostic query tools
• Run targeted diagnostic queries
• Perform standing data quality tests:
- Counterparty data
- CSA data
- Credit risk data
• Run scenarios/perform reconciliation on:
- Marks
- Trade level details
- Collateral
• Develop current state view of organizational structure, roles and responsibilities
• Examine linkages of policies back to roles and responsibilities
• Develop current state view of end to end processes
• Assess exception management and escalation procedures, including cross-departmental procedures
• Drilldown on targeted areas causing problems and Identify key control breakpoints
• Perform gap analysis of policies and procedures
• Develop current state view of
CM system architecture and datawarehousing
• Assess timeliness and accuracy of system feeds between front/middle/back office
• Review data integrity management processes and standards
• Define organizational roles and responsibilities
• Draft and agree principles relating to interim changes to Operating Model, e.g. data, sourcing, technology, locations
• Define manual and automated workarounds and associated control reporting tools
• Assess compliance of policies/procedures with regulatory guidelines and identify changes required
• Define tactical and strategic
IT upgrades
• Update procedures and training, including upstream procedures e.g. new product approval processes.
• Develop and train staff on new procedures
• Refine enhanced operating model from a process, data, technical, functional and organizational perspective
• Implement manual and automated solutions and associated control reporting tools.
• Embed policies in processing environment
• Implement exception reporting metrics:
- incorrect or stale valuation of exposures
- common CSA errors
- ratings based downgrade provisions
• Define future business service offering based on business and operational strategies
• Utilizing process analysis work completed in earlier phases, identify gaps between current state and enhanced operating process model
• Manage “quick win“ and medium term implementation processes with IT
• Design cross functional CM data integrity standards and controls, focusing on highest risk/return areas.
• Implement selected cross functional CM data integrity standards and controls
• Enhance use of automation, workflow and document management options
• Enhance data warehousing architecture and data integrity management
PricewaterhouseCoopers 12 Collateral Management • Challenges & Opportunities

Case Study
Problem
• The client was a leading global financial institution
• Client’s global Collateral Management (CM) group provides essential risk mitigation and client service functions to support the OTC derivatives and securities repurchase agreements (“repo”) businesses. The CM function was struggling with outdated enabling technology, major data management issues, and lack of mature and documented business processes. Collateral calls were not being properly issued, creating over $500 million in unnecessary risk exposure.
Recognizing the urgency to address these challenges, the client created a global initiative involving
PwC, internal resources and technical temporary resources in London and New York.
Approach
• Working with the client, PwC developed over 50 multi-variable scenario queries to identify and prioritize collateral deficiencies
• These scenarios were run against the client’s data to identify high impact quick wins as well as to develop a detailed understanding of the failures that were continuing to occur, leading to new defects appearing in the data on a daily basis.
• We also created an efficient, documented repeatable process to conduct a mass data clean-up effort in ISDA Credit Support Annex documentation.
• We worked with the client to develop and prioritize near and long-term process improvements to the day-to-day functioning of the global Collateral Management group.
PricewaterhouseCoopers 13 Collateral Management • Challenges & Opportunities

Case Study
Impact and Benefits to the Client
• We helped the client gain a deep understanding of the population of risks and exposures that exist within its Collateral Management unit – a deep root cause analysis of how the client came to have substantial uncollateralized exposure and what needed to be done to fix it.
• We helped the client remediate thousands of key data elements in the Collateral Management contract terms system – enabling immediate, significant improvements to the functioning of the
Collateral process and the rapid collection of several hundred million dollars in deficient collateral.
• The client further identified and fixed potential deficiencies (e.g., wrong credit limits, thresholds etc.) which carried aggregate potential exposure in the billions of dollars .
Next Steps
• We are beginning to assist the client in developing and implementing a fundamental re-design, including process re-design and an enhanced technology platform.
PricewaterhouseCoopers 14 Collateral Management • Challenges & Opportunities

Summary
• Certain clients are experiencing significant error rates and exposures generated from broken operational processes and flawed data – leading to as much as hundreds of millions of dollars in margin deficiencies and untold billions in parameter errors
• A root cause of the high levels of operational risk and/or actual operational failures can be traced to fragmented processes and siloed systems that can’t keep pace with product and volume growth
• We recommend that organizations undertake end-to-end operational effectiveness assessments in highly complex product areas
•
Processes need to be re-designed to meet the current and future needs of business and large stores of critical data may need to be remediated
• Experience shows millions (USD) or more may be at unnecessary risk and can be identified and collected in an early phase of the overall project
PricewaterhouseCoopers 15 Collateral Management • Challenges & Opportunities

• Ensuring the right data is uploaded into systems in a timely manner.
• Maintaining the integrity of the data across various functional groups and their corresponding systems, e.g., reconciliation, data warehousing, data control/governance systems
• Utilizing the data to price, collect, and track the collateral needed to stay within firm regulated exposure limits, i.e.
Do we have enough collateral to cover our counterparties?
Did we call the correct amount of collateral, based on counterparty ratings, loss given default, potential credit exposure, etc.?
Are we pledging more collateral than is required?
• Escalating issues where exposure exceeds firms’ acceptable limits due to insufficient collateral
• Adjusting and responding appropriately to changes in market conditions
•
Ensuring execution aligns with collateral management business strategy, i.e.:
What types of collateral are we holding?
Is it appropriate for the counterparty, given the industry they are in?
Are exposures or counterparty creditworthiness positively or negatively correlated with the type of collateral the counterparty is posting?
PricewaterhouseCoopers 17 Collateral Management • Challenges & Opportunities

3 – 12 months
Remediation & Tactical Fixes
9 – 18 months
Strategic Solution
People
Process
Technology
Data
Scoping & Diagnosis
Data Clean-up
& Remediation
Process Analysis Process Re-Design Implementation Optimization
• Establish Policy
Board, Steering
Committee and
Working Groups
• Agree on resourcing approach
• Confirm project scope
• Develop project plan and define workstreams
• Develop workstream project charters
• Confirm support required from technology teams
• Define initial data quality queries
• Review existing documentation on data sources and reconciliations
• Confirm data sources and data population
• Deploy data remediation and project management resources
• Develop data remediation metrics and progress reporting
• Interpret and assess results and determine remediation priorities
• Remediate collateral positions
• Refine/tailor diagnostic query tools
• Run targeted diagnostic queries
• Perform standing data quality tests:
- Counterparty data
- CSA data
- Credit risk data
• Run scenarios/perform reconciliation on:
- Marks
- Trade level details
- Collateral
• Develop current state view of organizational structure, roles and responsibilities
• Examine linkages of policies back to roles and responsibilities
• Develop current state view of end to end processes
• Assess exception management and escalation procedures, including cross-departmental procedures
• Drilldown on targeted areas causing problems and Identify key control breakpoints
• Perform gap analysis of policies vs procedures
• Develop current state view of
CM system architecture and datawarehousing
• Assess timeliness and accuracy of system feeds between front/middle/back office
• Review data integrity management processes and standards
• Define organizational roles and responsibilities
• Draft and agree principles relating to interim changes to Operating Model, e.g. data, sourcing, technology, locations
• Define manual and automated workarounds and associated control reporting tools
• Assess compliance of policies/procedures with regulatory guidelines and identify changes required
• Define tactical and strategic
IT upgrades
• Update procedures and training, including upstream procedures e.g. new product approval processes.
• Develop and train staff on new procedures
• Refine optimal operating model from a process, data, technical, functional and organizational perspective
• Implement manual and automated solutions and associated control reporting tools.
• Embed policies in processing environment
• Implement exception reporting metrics:
- incorrect or stale valuation of exposures
- common CSA errors
- ratings based downgrade provisions
• Define future business service offering based on business and operational strategies
• Utilizing process analysis work completed in earlier phases, identify gaps between current state and optimal operating process model
• Manage “quick win“ and medium term implementation processes with IT
• Design cross functional CM data integrity standards and controls, focusing on highest risk/return areas.
• Implement selected cross functional CM data integrity standards and controls
• Optimize use of automation, workflow and document management options
• Optimize data warehousing architecture and data integrity management
PricewaterhouseCoopers 18 Collateral Management • Challenges & Opportunities

Case Study
Scoping, planning, stakeholder and key metric reporting definition
Confirm data sources and data population
Run diagnostic queries
Perform comparison of system data to source Credit Support Annex’s (CSA)
Interpret and assess results and develop remediation priority list
Review results and agree resolution activity with management
Perform updates to correct data errors
(Manual or IT upload)
Remediate collateral positions
Report progress and MI on issues identified
Perform selective process mapping
Identify key control breakpoints
Develop tactical and strategic process redesign recommendations
Time
PricewaterhouseCoopers 19 Collateral Management • Challenges & Opportunities

Case study
• Working with the client, PwC developed over 50 multi-variable scenario queries to identify and prioritize collateral deficiencies
• We also created an efficient, documented repeatable process to conduct a mass data cleanup effort in ISDA Credit Support Annex documentation
• Scenarios were run against the client’s data to identify high impact quick wins - for example, customers with live trades and:
No upfront call issued
Stale MTM
Credit MTM ≠ Trade MTM
Out-of-range MTA and threshold values
Wrong call frequency
•
The query results were also used to prioritize strategic (business re-design) objectives based on actual patterns and frequencies of particular kinds of errors and deficiencies
• A flexible resourcing plan – PwC, client, legal temporary staff – allowed the client to get immediate tangible results while limiting project costs
PricewaterhouseCoopers 20 Collateral Management • Challenges & Opportunities

Case study
1,572 instances
Call
Frequency incorrect
$52 mm
Data in the graphic above are simulated and do not reflect any actual client information
PwC’s Collateral Diagnostic Tools are designed to quickly and efficiently identify, quantify and help prioritize high impact collateral shortfalls and deficiencies by cause and by client. Outputs can be promptly verified and sent to Margin/Collateral for immediate action during the project
PricewaterhouseCoopers 21 Collateral Management • Challenges & Opportunities

Scenario analysis – Update & capture of CSA data
Analysis of control risks and policy questions relating to counterparty Minimum Transfer Amounts
Distribution of MTAs by Counterparties with no external credit rating:
200
180
160
140
120
$mm 100
80
60
40
AAA
20
0
AA
AA-
A+
A
Source: Scenarios K5
NR
A-
BB+
BBB+
BBB
C ount erpart y M TA s
BBB-
Decreasing Credit Rating
Distribution of Thresholds Amongst Counterparties with no external rating and an internal rating of ‘No Rating’:
>$ 5mm
>$ 10mm
>$ 20mm
>$ 30mm
>$ 50mm
>$ 60mm
>$ 70mm
>$ 80mm
>$ 100mm
>$ 500mm
>$ 1bn
0 20 40 100 120 140 60 80
N u mb e r o f C o u n t e r p a r t i e s
Source: Scenarios Z5
PricewaterhouseCoopers 22
Scenario analysis – Trade Data Quality
Analysis of instances of incorrect ‘roll up’ of collateral value
Master
ID
304707
747638
865554
601815
688807
491096
208329
Counterparty Name
Counterparty 1
Counterparty 2
Counterparty 3
Counterparty 4
Counterparty 5
Counterparty 6
Counterparty 7
Security #
H25D8
H26T4
H25C2
H25D8
H25D8
H25C2
H25C2
Security Type
TSY
BILL/DISCOUNT
TSY BONDS &
NOTES
TSY
BILL/DISCOUNT
TSY
BILL/DISCOUNT
TSY
BILL/DISCOUNT
TSY
BILL/DISCOUNT
TSY
BILL/DISCOUNT
Total
Sum of
Haircut Market
Value
-1,081,023
-628,206
-492,090
-309,066
-279,367
-245,190
989,004
-$2,045,938
Sum of potential 'roll up' issues identified between 01 July and 30 September
24-Sep
23-Sep
20-Sep
11-Sep
9-Sep
3-Sep
27-Aug
13-Aug
6-Aug
1-Aug
27-Jul
16-Jul
2-Jul
150,000,000 100,000,000 50,000,000 0 50,000,000 100,000,000 150,000,000
Collateral Management • Challenges & Opportunities

Case study
• Assessment of type and frequency of errors
• Selective process mapping to identify issues with:
Data fundamentals – definition, ownership, control
Organization design
– roles, responsibilities and controls
Processes – streamlining and improving scalability
Technology – use of automation, workflow and document management options
• Assessment of root cause analysis findings
• Strategic recommendations based on global industry practice
Phased approach including short-term tactical fixes
Addresses organizational, process and technology issues
Develop and implement enhanced future state
PricewaterhouseCoopers 23 Collateral Management • Challenges & Opportunities

John Garvey
Andrew Wilson
Richard Paulson
Karen Joyce john.garvey@us.pwc.com
646-471-2422 andrew.d.wilson@us.pwc.com
646-471-7839 richard.paulson@us.pwc.com
646-471-2519 karen.a.joyce@us.pwc.com
646-471-5311
PricewaterhouseCoopers 24 Collateral Management • Challenges & Opportunities

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