Bank C is based in the EU and is subject to the Capital Requirements Regulation. Article 194(4) of the Capital Requirements Regulation (Regulation (EU) No 575/2013) states that a “lending institution” may recognise funded credit protection (such as the ‘collateral’ received under a repurchase transaction) as a credit risk mitigant only where it has the right to liquidate or retain, in a timely manner, the assets from which the protection derives in the event of the default, insolvency or bankruptcy of its counterparty.
In practical terms, this requires Bank C to procure and review legal opinions regarding the enforceability of its liquidation rights with respect to securities financing transactions in each jurisdiction in which it does business.
Performing legal reviews in all of the jurisdictions in which it engages in securities financing business is a hugely time-consuming and resource-intensive exercise for Bank C – diverting resource from key risk areas and restricting the ability of the legal department to support the growth of the business.
Fortunately, Ark 51 allows Bank C to eliminate this burden.
Through Ark 51’s opinions module, Bank C has access to all of the legal analysis it requires in order to fully assess its liquidation rights, presented in real-time, in a user-friendly format.
Applying its new-found ability to make quicker, better-informed risk and commercial decisions, Bank C turns a process that was once a regulatory burden into a source of competitive advantage. Internal resource is released to focus on high-value risk issues, compliance is enhanced and balance sheet usage is reduced. The ROI generated by Ark 51 is many times the initial investment.