Collateral Transfer Pricing: Lessons Learned and Best Practices for Banks and Asset Managers

Collateral Transfer Pricing (CTP) incentivizes the supply of assets into the central collateral pool and allocates the costs of collateral to the underlying consumer. Creating the right incentive mechanisms and setting transfer pricing rates for collateral assets is a complex task and the next industry focal point as collateral use increases.

This report outlines a conceptual blueprint for the implementation of an effective policy for CTP to improve overall efficiency in asset usage for firms, improving deal pricing and in ensuring the profit and loss (P&L) derived from collateralization of counterparty credit exposures is correctly allocated.

Key discussion points include:

  • What CTP is and why it matters
  • Guiding principles for CTP
  • Industry CTP methodologies
  • A framework for best practices

The report should be read by managers in securities finance, collateral management, risk, treasury and operations to help these individuals determine ideal strategies for implementing CTP in their organizations.

The report has been produced jointly between InteDelta, Finadium and SunGard.

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