triReduce key benefits
optimizing leverage ratios, reducing risk
Today, reducing the size of OTC derivatives notional exposures and the number of line items in a portfolio are key risk management objectives. The benefits are significant for individual market participants and for the financial system overall.
Optimizing leverage ratio
Emerging capital rules for derivatives and anticipation of Basel III implementation has focused attention on reducing gross notional exposures. Lower gross notional exposure contributes to bringing an institution’s leverage ratio in line with regulatory expectations, an important goal for financial institutions.
The new clearing thresholds in EMIR have also attracted the attention of non-banks in the commodity space who wish to proactively managing their gross notional exposures through triReduce.
Manage counterparty credit risk
Managing counterparty credit exposure changes through triReduce opens up credit line capacity for new business. Multilateral termination removes transactions and reduces collateral requirements by keeping portfolios trimmed down.
Participating in triReduce cycles reduces both the regulatory and economic capital costs associated with OTC derivatives, especially for capital intensive emerging market transactions.
Reduce line items, operational risk and costs
Trades that are eliminated, reducing line items in a portfolio, no longer require periodic payments to be calculated and settled, reducing operational costs significantly. In addition, potential errors and the costs associated with resolving errors, including operational risk capital charges, are eliminated.
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