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Requirements

According to regulatory requirements, financial institutions have to allocate a certain percentage of shareholders' equity for credit risk resulting from derivatives positions. This significantly reduces the capital available for other business opportunities and imposes a high cost of capital. Further, both regulated and non-regulated financial institutions are interested in minimizing collateral provisions.

 

Credit risk and collateral provisions can significantly be reduced by way of master agreements featuring netting. The risk-reducing quality of such netting agreements needs to be evaluated based on legal opinions or regulatory requirements.

Furthermore, each transaction to be included in netting has to be confirmed with correct reference to the governing master agreement.

Solution

Framesoft's Netting Suite is focused on reducing counterparty credit risk and minimizing collateral provisions. The suite consists of:

which serves as the central data repository for contract, counterparty and product data and

which automates the process of generating trade confirmations including correct references to master agreements

The applications provide dynamically configurable functionality and data structures which can easily be adapted in order to meet new or changing business or regulatory requirements.