Collateral margin disputes are disagreements between counterparties over the amount or value of collateral that is required to be posted or returned under a collateral agreement. Collateral margin disputes can arise due to various reasons, such as: - Differences in the valuation of the underlying derivatives portfolio or the collateral assets - Differences in the calculation of the margin requirements, such as the initial margin (IM) or the variation margin (VM) - Differences in the interpretation or application of the collateral agreement terms, such as the eligibility criteria, haircuts, thresholds, or dispute resolution procedures - Operational errors or delays in the margin call process, such as the exchange of data, the confirmation of calls, or the settlement of transfers Collateral margin disputes can have negative impacts on both parties, such as: - Increased credit risk and liquidity risk due to under-collateralization or over-collateralization - Increased operational risk and legal risk due to errors, disputes, or litigation - Increased capital requirements and funding costs due to regulatory or contractual obligations Therefore, it is important to have an effective and efficient collateral margin dispute resolution process, which can involve the following steps: - Identification of the source and cause of the dispute, such as the data, the calculation, the valuation, or the agreement - Escalation of the dispute to the appropriate level of authority and responsibility, such as the operations, the risk, or the legal teams - Communication and negotiation with the counterparty to resolve the dispute, such as by providing evidence, clarifying terms, or agreeing on adjustments - Documentation and reporting of the dispute and its resolution, such as by updating records, issuing confirmations, or notifying regulators Some best practices for minimizing and resolving collateral margin disputes are: - Adopting standardized and transparent collateral agreement terms, such as the ISDA Credit Support Annex (CSA) or the ISDA Standard Initial Margin Model (SIMM) - Implementing robust and automated collateral management systems and processes, such as the Algorithmics Collateral System or the triResolve Portfolio Reconciliation service - Performing regular and accurate portfolio reconciliation and valuation, such as by using third-party data providers, independent valuation agents, or dispute resolution platforms - Establishing clear and consistent dispute resolution policies and procedures, such as by defining roles, responsibilities, timelines, and escalation levels - Maintaining good communication and relationship with counterparties, such as by exchanging information, resolving issues, or seeking feedback #CollateralManagement #CollateralGyan
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9. How secure is the “QC” deposit, and what does “non-depletion” mean? The QC deposit is completely secure. It is placed in Tier 1 banks or fully regulated law firms, ensuring that the funds are never at risk. The "non-depletion" clause ensures that your funds remain untouched throughout the loan term. Our structure also allows for full control of the funds, with no possibility of them being used as collateral or seized in case of default.
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Master of Commerce | 11 Years of experience in Accounts and finance, audit & Taxation | Always belive in actions than words | Priorities - Health, family, time and schedule.
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