Turning compliance costs into competitive strategy

Created to alleviate and mitigate the build-up of systemic risk in financial markets, regulations drafted and implemented in South Africa post the global financial crisis have brought with them major complexities.

 

For entities with multiple exposures across various markets (e.g. a bank with multiple securities financing and derivative disciplines) this compounds to a plethora of regulatory, reporting and capital obligations for a single entity.

 

It is not surprising then that the cost implication of managing inventory and associated operational complexity across silos and eligibility requirements is costing companies significantly more than anticipated. In fact, according to Deloitte in 2017, when compared with pre-financial crisis spending levels, operating costs spent on compliance have increased by over 60% for retail and corporate banks. From reporting, to collateralisation, to capital penalties imposed for failure to conform, the cost associated with an inefficient strategy will become a competitive issue in the future, directly affecting bottom line performance.

 

While South African banks may not have been hit by the full force of the regulatory tidal wave just yet, the top tier banks are starting to feel the compounding effects. Phase 5 and 6 of the European EMIR uncleared margin requirements mandating the provision of non-cash collateral for initial margin comes into effect in September this year, tailed in 2021 by the JSE Securities Exchange’s acceptance of non-cash collateral for initial margin for exchange-traded derivatives in South Africa. Add these regulations to the current Basel IV requirements demanding collateral and reporting for LCR, NSFR in 2021, and the upcoming SACCR requirements in October (non -modellable approach for measuring counterparty credit risk associated with derivatives), and a strong case is made for the accelerated adoption of internal and external systems and compliance technologies.

 

Given the impact of various forms of regulation across numerous areas, there is increased demand for standardised reporting as well as greater contention over access to high-quality collateral. With an estimated R60 billion shortfall in high-quality liquid assets in South Africa according to the SARB, a cross-asset, cross-functional view that consolidates data and takes into consideration holistic collateral inventory will help to drive profits and a competitive strategy. It is, however, the bank that does collateral inventory management best that will gain the competitive advantage.

 

Kelly Robinson

Strate Collateral Services

 

Strate e-Voting continues to serve the financial markets amidst COVID-19

The COVID-19 pandemic is impacting our economy, our face-to-face business interaction and placing insurmountable strain on governments and healthcare systems in South Africa and globally. We acknowledge that this is a critical time for our clients as we all establish ways to manage the National State of Disaster.

 

Strate’s resilience measures remain focused on ensuring we continue to serve the financial markets while withstanding a diverse and varied set of stress scenarios. As such we have taken the necessary steps to enable our employees, clients and business partners, through our digital platforms,  to carry on with business-as-usual activities.

 

Strate implemented an electronic voting platform in December 2019, that provides you with an e-Voting solution. This is an end-to-end voting solution to cater for the South African market with the primary focus of reducing risks and inefficiencies in the value chain.

 

In light of the conditions we face in managing the pandemic, one of the benefits of e-voting is the ability to host virtual meetings for your shareholders. For issuers facing the cancellation of shareholder meetings, e-voting enables you to still go ahead with your meeting virtually via our digital platform.  The in-platform chat functionality allows for interaction between shareholders and issuers and maintains the integrity of the process.

 

We would like to assure you that during the nationwide 21 days of lockdown, it is “business as usual” at Strate as we are 100% committed to business continuity. Through our combined efforts as a market, we can stand together to flatten the curve and decrease the spread of COVID-19 in South Africa.

 

Strate remains committed to serving the South African financial markets. Should you have any questions regarding the use of Strate e-Voting, please contact the team on e-Votingteam@strate.co.za

Strate continues to serve the financial markets amidst COVID-19

The world is dealing with an unprecedented global health emergency, Novel Coronavirus disease (COVID-19). At Strate, we have been closely monitoring the situation. Our primary concern remains our ability to continue our services to the financial markets while ensuring the wellbeing of our employees in the face of this pandemic threat.

We would like to assure you that Strate has taken the appropriate measures to ensure the continuity of our business activities. We are leveraging various technology solutions to remain productive and in constant communication with our employees and the markets as a whole.

 

As a systemically important financial institution, we would like to assure you that during the nationwide 21 days of lockdown, it is “business as usual” at Strate as we adapt to the new way of working but rest assured that we are 100% committed to business continuity, just as we are in upholding the well-being of our employees and helping the country curb the spread of the coronavirus.

 

We have supplied back-up power appliances to ensure business continuity during power disruptions when employees are operating remotely.  These measures have been extensively tested and we are pleased to report that Strate is prepared.

 

Despite the exceptionally high volume of transactions being processed across the financial markets, Strate is performing well, with all services operating normally.  Our focus remains on serving the financial markets with the same level of efficiency and commitment you have come to expect from us.

 

We appreciate your support and understanding as we all adapt to these challenging times.

For more information, contact info@strate.co.za

Welcoming Absa Bank as a full bank participant

We are delighted to welcome Absa Bank Limited on its return as a full bank participant in the equities, bonds and money market environments.

 

In fulfilling our purpose to serve the financial markets, Strate is committed to supporting Absa’s ambition to re-establish its custody and trustee services offering to clients in South Africa.

 

Custody and trustee services has transitioned from Société Générale to Absa, with go-live on 2 March 2020.

 

Strate looks forward to continuing to build our relationships with Absa as both a customer and a shareholder that has provided ongoing support over the years.

Reporting and matching unlisted bond transactions

Strate has introduced an alternative digital access point for the reporting and matching of unlisted bond transactions and call bond transactions.

 

The new user-friendly platform provides custody, settlement and corporate action processes (coupons and redemptions) to the unlisted bond market. The platform can also facilitate the trade reporting of call bonds.

 

Users can directly report unlisted bond transactions to Strate for settlement purposes via the digital access point, which reduces risk and increases efficiency. Strate’s infrastructure allows for digital record keeping, which provides asset security. The platform offers an automated coupon and redemptions process that distributes these benefits seamlessly and timeously.

The platform went live on 18 November 2019.

For more information, please email unlistedsecurities@strate.co.za