Damage limitation

Efforts are under way to formalise the resolution process for collateral disputes, while other initiatives are planned to improve processes for posting collateral, valuation and margin practices. What are the challenges to meeting these targets? Ryan Davidson reports

The financial crisis exposed many holes in established risk management practices, but few have triggered the same flurry of activity seen in the collateral space. Banks saw a surge in collateral disputes as the crisis struck, most notably after the collapse of Lehman Brothers last September, which they struggled to resolve given the lack of an accepted valuation and dispute resolution protocol. Hedge funds, too, were caught out when the broker-dealer went under, with many discovering they could