ISLA Connect Educational Briefing 2025

The Future of Collateral Management

As global financial markets evolve, collateral management has become a cornerstone of liquidity, risk mitigation, and regulatory compliance. The ISLA Connect Educational Briefing 2025, hosted by BlackRock in London, focused on key challenges and innovations shaping the future of collateral. From the mechanics of the GMSLA framework to emerging technologies like tokenisation, the session provided a comprehensive overview of how different market players lenders, borrowers, and tri-party agents navigate collateral management in an increasingly complex environment.

Panel Discussion – Industry Experts

• Jamie Pullen – Director, Legal, BlackRock
• Stefan Kaiser – Managing Director, Global Head of Product for Securities Lending, BlackRock
• Emma Bussell – Securities Lending Business Strategist, BlackRock
• Emily Deering – Vice President, Securities Lending Product Development, BlackRock (Lender’s perspective)
• Graham Gooden – Executive Director, J.P. Morgan (Tri-Party Agent’s perspective)
• Harry Ruffell – Vice President, Asset Optimisation Group, Bank of America (Borrower’s perspective)

Key Topics Discussed

Jamie provided a detailed explanation of the Global Master Securities Lending Agreement (GMSLA), which serves as the standard framework governing securities lending transactions.

• Trade Lifecycle : Covers how collateral is posted, maintained, and adjusted throughout the loan lifecycle.
• Over-Collateralization & Haircuts: To manage risk exposure, GMSLA allows over-collateralization through haircuts. Example: If collateral worth €100 is provided with 2% haircut, the value of collateral will be €98. Therefore, one needs to post an asset worth €102 to meet the €100 collateral requirement post haircut
• Mark-to-Market Provision: Ensures collateral maintains its required value through daily revaluation. Example: If the security value is €100 and collateral is €102, adjustments will be made depending on market movements to maintain required exposure.
• Netting Provisions: Helps in reducing exposure by offsetting multiple transactions, lowering capital requirements and counterparty risk.

Perspectives on Collateral Management

The table below summarizes the insights shared from each market participant’s perspective:

Evolving Trends in Collateral Management

• Collateral Optimisation Technology: Growing focus on efficient allocation of different assets as collateral. Advanced analytics and automation are helping optimise collateral flows across bilateral and tri-party structures.
• Tokenisation of Assets: Streamlining operational efficiency in collateral management. Potentially broadening the types of assets available for collateral use. Could enhance real-time settlement and transparency across financial markets.

Industry Takeaways & Future Outlook

1. Tri-Party & CCP Clearing Growth: As collateral demands rise, tri-party arrangements and central clearing parties (CCPs) are becoming more critical for operational efficiency.
2. Tokenisation & Digital Assets: The shift towards tokenising assets for collateral use could improve settlement speed, liquidity, and transparency.
3. AI & Automation in Collateral Management: AI-driven collateral reconciliation tools are improving efficiency and reducing operational risks.
4. Regulatory Compliance & Market Adaptation: Lessons from past crises (2020 Dash for Cash, 2022 Gilt Crisis) highlight the importance of strong collateral frameworks for market resilience.
5. Risk vs. Flexibility in Collateral Management: Firms must balance protective measures (haircuts, risk-adjusted collateral) with the need for flexibility and competitive pricing to remain agile in evolving markets.

The ISLA Connect Educational Briefing 2025 reinforced how collateral management is becoming increasingly complex and essential for financial market stability.