Collateral Arrangements

Many corporates are contemplating to enter into collateral arrangements with banks. The European Treasurers' Peer Group has performed a survey to inquire about advantages and disadvantages:

Disadvantages

1. Cash flow may be a problem if the valuations work against you.
   
   
2. Risk of cumbersome administration.
   
   
3. It can be argued that the corporate gets decreased flexibility in managing portfolio when it has to deliver collateral.

Advantages

1. With a CSA the bank’s capital requirements are decreased, which should benefit the corporate.
   
   
2. An arrangement decreases the risk for the corporate on the bank.

If you are interested in participating and learning more about the European Treasurers' Peer Group, please contact me.