Great big growth area: collateral management?

Traditionally, collateral management wasn't at the sharp end of interesting jobs in financial services. A support and operations function, it used to be about managing reconciliations and margin calls, usually on a business-by-business or desk-by-desk basis.

This, however, is changing.

New liquidity and financing requirements are prompting the emergence of collateral management as a centralised function. In the process, it has the potential to become a revenue-generating area in its own right. People who gain experience in centralised collateral management now could find themselves highly sought after later.

"This is the decade of collateral management," says Roy Zimmerhansl, owner of financial training company Fintuition. "Collateral management and prime brokerage are the only two parts of the business that are making money and hiring right now."

Morgan Stanley currently has 100 people working in its collateral management business and says its OTC collateral management team is due to grow, "substantially" in the next two years as new regulations are implemented.

Back office jobs now, revenue generating jobs later?

For the moment, many of the jobs in centralised collateral management still involve business analysis and project management as banks try and work out how to manage their collateral efficiently in the new regulatory environment. Over time, Zimmerhansl predicts this will give way to more revenue-generating opportunities.

"Until now, each business area has owned its collateral and been free to optimise it as it feels appropriate," says Zimmerhansl. "It's been difficult to centralise this because collateral management is related to P&L and individual desks have been resistant to giving up control.

""Right now, people are using collateral to support their own businesses and to the extent that there is excess, it might go unutilised. At some point, as new regulations start to bite, there will be a new collateral czar who will override individual desks' P&L requirements," Zimmerhansl predicts. "Collateral management can be a revenue-generating area through collateral upgrade trades and collateral swaps."

Ralph Silva, a consultant at SRN, says the move towards centralized collateral management is being hastened by improvements in technology. "It's hard to assess how accurately collateral is being measured when it's centralized," he says. "But there have been huge strides in this recently."

In five years' time, Zimmerhansl predicts collateral management will have changed completely. "The jobs now are for project managers because no one really has a handle on how this will pan out. But one thing's for certain - in 2016 collateral management won't look anything like it does now."