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Markets all over the place? My liquid loan book is fine

20 December 2018

After heading for possibly the worst December losses since the Great Depression, markets recovered quickly with the New Year. While some commentators say that January gains will amount to gains for the year, there is little doubt that volatility will remain a market feature through the months ahead. Economies are exiting quantitative easing and starting to face tighter economic conditions.; geopolitical uncertainty will also play a role. 


CBOE Volatility Index - Aug 2018 - Feb 2019
CBOE Volatility Index – Aug 2018 – Feb 2019


Volatility makes it harder for banks and wealth managers that lend against liquid securities (Securities-based lending – SBL) to manage LTVs and loan exposures. Marking-to-market against the previous day’s prices and ratings is critically important.  As is the ability to act on any out-of-margin or, worse, underwater loans.

At Rockall, we believe that Liquid lending’s strong growth is set to continue, driven by a number of factors:

· More banks entering the market

· Higher penetration of “unpledged” AUM

· Continued disruption from emerging FinTechs

· Emergence of Mass Affluent as a substantial driver of demand

Against the background of a substantially wider customer base, the issue of SBL monitoring and risk management at scale is crucial. More than ever, wealth managers operating in this space need to be able to accurately assess LTVs using daily portfolio data, market prices and ratings information. Without the ability to manage loans at scale, the bank is fundamentally vulnerable to a severe volatility event.

FASTNET, our SBL in the cloud solution, automatically pinpoints at-risk loans based on daily market and portfolio information. You can immediately assess risk in your book and take corrective action. Action sets can be used to channel workflow and ensure that the correct steps are followed and tracked in relation to each loan status, giving direction to the RM/FA and the client as to what needs to happen next in relation to curing the loan.

The more chaotic the markets, the more crucial it is that you have the information and processes at hand to manage relationships, preserve the bank’s brand and, most of all, protect against loss. In a business that is growing quickly, and with the Mass Affluent segment inducing volume, make sure you can act on that flashing red light.

Learn more about how FASTNET can accelerate your SBL business growth while protecting against risk.

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