‍The Client

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Founded in 1828, this US regional bank (‘Bank’) is one of America’s oldest banks.

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The Bank is a large banking institution based primarily on the US East Coast with additional locations in the Midwest and Southern United States. It offers full-service banking, including student loans, home and personal lending, and investment services.

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The Bank has a growing OTC derivatives portfolio as part of its investment hedging services, both cleared and uncleared, and a maturing collateral practice.

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The Background

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Historically the Collateral Operations processes at the Bank have been largely offline and manual, as has been the case at many other firms across the industry.

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In recent years, the Bank has been impacted by multiple, major OTC derivative regulations, including mandatory OTC clearing and pending compliance with the Initial Margin regulations (UMR).

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Those regulatory drivers, combined with increasing volumes for OTC collateral agreements and margin calls, have triggered a change in the Banks’ s’ collateral operational strategy. 

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The Bank revised strategy is to transform and future-proof their end-to-end collateral infrastructure, with a focus on automation, scalability and robust controls. 

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A key related delivery was a new collateral management technology vendor platform for OTC collateral, to support the Bank’s operational workflow for margin and collateral.

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In parallel to the IT changes, the Collateral Operations team has also recently been separated out from the wider Treasury function to form a new, dedicated Collateral team.

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The Challenge

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Driven by the high regulatory and infrastructure transformation taking place within OTC derivatives collateral at the Bank, combined with the relative ‘newness’ of the Collateral Operations team, Senior Management agreed a need to uplift the knowledge base within the Collateral Operations team.

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Key objectives of the knowledge uplifting were to:

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• Minimize internal operational risk and regulatory compliance risk
• Increase team productivity
• Increase team efficiencies 

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The Bank’s preferred solution to achieve those objectives was to leverage high-quality collateral training, led by industry specialists. 

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The real challenge was that resources with the prerequisite expertise were not readily available internally.

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The Engagement

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During the early stages of COVID lockdown in 2020 the Bank engaged Tonic, a specialist consultancy in collateral and post-trade. 

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At Tonic we offer expertise-led, cross-product collateral and post-trade foundations training. Our training is modular and therefore flexible, with clients choosing those modules that are the most relevant to their needs.

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The first task for Tonic was to assess and understand the Banks high-level set-up, including their strategy, scope, key systems and training requirements.

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Once done, Tonic was able to define a training program that would meet the Banks bespoke training needs.

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The agreed approach was for the training to be spread out across a 4-week period, via 20 total hours of training, broken down into 2-hour training modules. 

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This meant that training would remain focused throughout. It also ensured that training would not interfere with business-as-usual operations workflow, nor the parallel collateral vendor delivery taking place, both of which were key requirements from the Bank.

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Specialist training was then led remotely from the UK by Tonic’s experts, via webex, for their US counterparts at the Bank. This allowed for an interactive training experience with team members, during a period when COVID prevented travel and in-person training.

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Key topics covered within the training included, but were not limited to:

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• Collateral product overview
• Regulation breakdown
• Legal contracts
• Industry infrastructure
• Key vendors
• Future industry change
• End-to-end, best practice process modules

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Multiple Bank stakeholder teams who interact with the Collateral Operations team also joined the training, including Treasury, Legal, Risk and Front Office, to uplift their own respective knowledge levels.

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To close out the training, review and wrap-up sessions were held with the Operations team to ensure that key topics had been understood and any additional questions answered (note that Tonic also offer formal tests and qualifications).

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All training modules were successfully completed on schedule, with full attendance from the 

Collateral Operations team throughout. 

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The Outcome

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Tonic’s training content more than satisfied our objectives. The training provided a strong foundational knowledge base for key staff and interested parties across functions. Establishing this baseline was critical to effectively controlling risk, supporting strategic growth initiatives within an evolving regulatory environment, and developing internal subject matter expertise.  

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’It was a pleasure working with the team at Tonic. They worked under tight timeframes, were sensitive to internal scheduling needs, and effectively worked around pandemic induced logistical challenges to deliver a strong product for us.’

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Tonic University

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• Tonic provides industry-leading, cross-product Collateral and Post-Trade Foundations training through Tonic University
• Our Foundations training is delivered via a series of targeted modules per product, led by >30 years hands-on experience of our co-founders and pool of industry specialists

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Tonic University Benefits

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• Accelerated resource understanding & productivity
• Reduced operational risk (errors/breaches)
• Increased team efficiencies and flexibility
• Motivated employees
• Removed training burden for client

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Please contact us on info@thetonicconsultancy.com for more information about our Tonic University services.

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