BNY Mellon

The way that collateral is being used, and indeed needed, in financial markets has altered significantly since the financial crises. With the central role handed to CCPs in markets, the majority of trades now need to be collateralised in one way or another.

Asset managers and end investors should consider increased due diligence as to the way in which their assets are held in custody at their custodian banks following the UK Financial Conduct Authority’s (FCA) £126 million fine of BNY Mellon.

Firms outsourcing the compilation and submission of their Annex IV to fund administrators could find themselves under pressure to disclose the document to investors if administration costs are borne by the fund.

A survey conducted by BNY Mellon in conjunction with FTI Consulting on the eve of the implementation of AIFMD (Alternative Investment Fund Managers Directive) found that 13 percent of managers would pass the costs of Annex IV onto the fund, while 29 percent said they would offset some of the costs to the fund.

One of the marked changes across the post-trade landscape post-2008 has been the emphasis on the roles of the middle and back office functions at firms. No longer just cogs in the machine, they have taken a central role in the post-crisis world as regulatory challenges and burdens weigh heavily. Regulators across the globe, in attempting to avert future financial contagion, have shone a light on these previously unheralded departments, making their functionality more important than ever before.

The Alternative Investment Fund Managers Directive (AIFMD) states that each AIFM, for each AIF that it intends to market within the European Union (EU), must appoint a single depositary in accordance with Article 21.